India 2012/13 Iran crude imports could plunge 25 pct.

India's annual crude imports from Iran could plunge by about a quarter in 2012/13, according to Reuters' calculations, as Essar Oil joins its state-run refinery peers in cutting purchases from the sanctions-hit country.

The reduction is greater than the 15-22% benchmark set by Japan for its waiver from punishing U.S. financial sanctions and could secure exemption for New Delhi, which has dismissed the measures in public but privately called for cuts.

"We will gradually reduce the dependence on Iranian oil. We are shifting our focus to source heavy crude from Latin American countries like Venezuela, Brazil, Colombia and Mexico," Essar Chief Executive L. K. Gupta told reporters.

A source familiar with the plan said Essar, like other Indian refiners, plans to lift about 15% less oil from Iran in 2012/13.

An industry source said India would cut its Iran oil purchases between 22-25% in the next fiscal year including the Essar reduction.

Essar is currently Iran's second biggest Indian oil client, importing about 100,000 barrels per day (bpd).

India, the world's fourth-largest oil consumer, buys around 12% of its oil from Iran and is paying through Turkey's Halkbank after a previous clearing mechanism was shut in December 2010 under U.S. pressure.

The United States last week exempted Japan and 10 EU nations from financial sanctions citing their efforts to significantly cut purchases, while Iran's top customers China and India remain at risk of such steps.

"At the moment, India is not one of those with an exemption. The answer of India was that they have their contracts running from April to March," the International Energy Agency's executive director, Maria van der Hoeven, said last week.

New Delhi publicly maintains it will not seek a waiver to the U.S. measures and that it sees no need to reduce oil imports from Iran because that is not required under United Nations sanctions, although it acknowledges the need to diversify supplies.

Privately it has asked refiners to cut by at least 15%.

MRPL , Iran's top Indian client which sources about three-fifths of its oil needs from Tehran, plans to cut imports to 80,000 bpd in the next fiscal year ending March 31, 2013 versus the contracted 142,000 bpd in the 2011/12.

Essar, which shipped in 60% of its total imports or 179,300 bpd oil from Iran in February, has increased use of Iran's tanker fleet owned by NITC to avoid the problems arising in insuring other vessels by European Union sanctions.

It imported nearly 90% of its oil from Tehran in NITC's fleet last month, according to tankers discharge data available to Reuters.

Indian companies have asked Iran to bear the oil insurance risk amid sanctions but there are fears that dependence on Tehran for cover could mean higher oil prices for its buyers.

The Indian government is also weighing an option to extend sovereign guarantee to local shipping lines for importing crude from Iran.

Source : moneycontrol.com