Government asks oil companies to draw up emergency import plan in view of Iraq crisis.

NEW DELHI: The government has asked energy companies to prepare contingency plans for oil imports as the crisis in Iraq has put a cloud on India's second-biggest source of crude oil, while rising prices threaten to raise subsidies, stoke inflation and upset India's fiscal calculations.

Oil supply has not been disrupted and the country has adequate stocks, but officials and industry executives are worried as Brent crude oil, the most widely used international benchmark, has soared to a nine-month high of nearly $115 per barrel, government and industry officials said.

"There are clear concerns that significant supply disruption is not far off," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates, according to a Reuters report.

The government wants to make sure that there is no disruption in oil supply, which can severely unsettle economic activity. It is also concerned about the rising oil prices. Brent crude soared to a nine-month high of nearly $115 per barrel.

Oil minister Dharmendra Pradhan held a series of meetings with senior bureaucrats and top executives of Indian Oil Corp officials till late evening on Thursday on back-up plans for oil imports as Iraq, world's second-largest oil exporter after Saudi Arabia, asked US for airstrikes to fight insurgents, a senior ministry official said.

Asenior executive in Indian Oil Corp said the company has prepared its back-up plan but does not expect the effects of crisis in Iraq to spillover to India. He said Indian refiners will be hit only if the disruptions in Iraq continue for a longer time and the insurgents move toward southern part of that country that accounts for almost 70% of crude production. "We have prepared a contingency plan, which the ministry asked us to do. We do not expect any problems in India as we have a comfortable stock of 28 days," he said.

Essar Oil said there are no major disruption of crude oil supplies out of Iraq yet, since the major oil fields are in southern Iraq and the hostilities are yet confined to Northern Iraq. "We are closely watching the situation. Having said that, let me reiterate that Iraq is not a major supplier to Essar Oil. In case of disruption in supplies from Iraq, we have other supply sources from where we can meet the shortfall," acompany spokesperson said.

India imports about 25 million tonnes of oil from Iraq each year. It is the world's fourth largest oil consumer, importing roughly 80% of its crude requirements. Indian crude oil imports, which includes many grades that are cheaper than Brent crude, became costlier by about $4 a barrel to $110 per barrel in the past few weeks.

Source : economictimes.indiatimes.com