Jan 29, 2011
Iran will continue to supply oil to India for the time being, Indian company officials said, even though the two countries have yet to resolve a row over oil payments.
"As of now we have no plans to cut supplies to India,” a source at National Iranian Oil Company (NIOC) told Reuters.
"Iran is still sending oil to India, because it’s under a long-term contract and supplies can’t be just cut off like that,” an Iran oil industry official said.
"We are still in talks in terms of the payment issues,” the official added on condition of anonymity.
India’s Mangalore Refinery and Petrochemicals (MRPL) said it wanted to resolve the issue within two weeks.
"We want the issue to be resolved at the most by the first week of February. After that the matter will become worse as by then we need to finalize the laycan (shipment) dates for March,” MRPL managing director UK Basu told Reuters.
MRPL is Iran’s biggest Indian client buying about 150,000 barrels per day of Iranian crude oil.
Basu said Iran had said it would meanwhile maintain normal supplies. "We finalize the laycan dates in the first week of every month for the next month,” he said.
India-Iran annual crude deals run from April to March.
The Reserve Bank of India (RBI) said last month payments to Iran could no longer be settled using a long-standing clearing house system run by regional central banks.
Since then, the two sides have struggled to find a solution. An Indian delegation went to Iran earlier this month to discuss the matter. S. Roy Choudhury, chairman of Hindustan Petroleum, also did not see supply disruption from Iran.
"We are buying crude on 90 days credit. I don’t see any problem in getting crude from Iran. I am hopeful the issue will be resolved soon,” Roy Choudhury told Reuters.
Indian companies MRPL, HPCL, Indian Oil Corporation and Essar Oil import about 400,000 bpd Iranian crude.
Meanwhile, Mehdi Fakheri vice president of international affairs at the Iran Chamber of Commerce, Industries and Mines, said in an interview in Mumbai on Friday that Iran may halt crude shipments to India in two weeks if a gridlock over payments that threatens $9.5 billion of oil trade between the nations isn’t resolved.
Indian refiners owe Iran about $900 million for crude oil after payments to the Persian Gulf state stopped more than a month ago, Fakheri said in an interview in Mumbai on Friday.
"If there is no payment solution, I am afraid Iran will be selling its oil to other countries,” he said, adding "Then our trade exchanges will drop to almost 20 percent of” the current level, Bloomberg reported.
Refiners including state-run Indian Oil Corp., the nation’s largest, need to find a way to pay for Iranian crude after the Reserve Bank of India on December 27 dismantled a mechanism used to settle oil trades in euros and dollars. Stoppage of shipments may force Mangalore Refinery & Petrochemicals Ltd., the largest Indian buyer of Iranian crude, to purchase oil at higher prices from the spot market.
Officials from Indian and Iranian central banks are in talks to settle trades in their domestic currencies, Fakheri said. Iran is India’s biggest oil supplier after Saudi Arabia.
India imports about 21 million tons of crude from Iran annually, Oil Secretary S. Sundareshan said on Dec. 30. Refiners currently receive oil shipments from Iran on credit.
At current oil prices, $900 million would fetch about 10 million barrels of crude, or the total capacity of five Very Large Crude Carriers.
Iran, OPEC’s second-biggest oil producer, has received offers from "some” European and Asian countries to buy the crude it sells to India, Fakheri said, declining to identify the countries.
"We already have had some questions in parliament and the ministry of oil,” he said. "If for any reason the Indian government is not in a position to pay, we better find other clients and get paid.” On June 9, the UN Security Council adopted a resolution imposing a fourth round of sanctions against Iran over its nuclear program.
The UN resolution was followed by unilateral sanctions from the US, the EU, Australia and Canada.
Iran has dismissed the measures as "futile”, saying the new measures will only deteriorate the problem.
Iran pumped 3.7 million barrels a day in December, making it the second-largest producer in the Organization of Petroleum Exporting Countries, according to a Bloomberg survey. Other countries in the 12-member group are Algeria, Angola, Ecuador, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.