Mangalore Refinery may cut Iran oil imports in July.

New Delhi: India’s biggest buyer of Iranian oil may only import one-fifth of the 3.3 million barrels of crude it had scheduled for July due to insurance and shipping difficulties caused by European Union sanctions on Tehran, industry sources said.

The possible drop in imports by state-owned refiner Mangalore Refinery and Petrochemicals Ltd (MRPL) underscores the problems the EU sanctions, which ban most of the world’s major insurance firms from covering shipments of Iranian oil, have created for Iran’s major Asian customers China, India and Japan since coming into effect on 1 July.

Along with US sanctions, the EU measures, which include an oil embargo, has so far halved Iran’s year-on-year oil sales. The sanctions are aimed at choking off Tehran’s oil revenues to force it to abandon a nuclear programme the West believes is being used to build a weapon, a claim Iran denies.

Photo: Bloomberg

Photo: Bloomberg
India had initially allowed state-owned refiners to use Iranian tankers to ship oil purchases from Iran but swiftly backtracked to benefit its own shipping industry, stipulating that state-run oil firms must use Indian ships and allowing limited coverage by state-run insurers for Iranian cargoes.

MPRL had planned to import five cargoes of 660,000 barrels each from Iran in July. The shipping ministry gave it approval to ship a single cargo on an Iranian tanker after the blanket approval was withdrawn, two industry sources said.

The company may not be able to transport any more cargoes as its shipping firm, the privately-owned Great Eastern Shipping Company (GESC), is unwilling to carry Iranian crude due to the limited insurance cover.

“Iran had allocated two aframaxes to MRPL to ensure supply of at least four cargoes in July, but now the shipping ministry is not giving permission to buy on a CIF (delivered) basis and Great Eastern is still keeping MRPL in the dark,” said one of the sources.

“MRPL is talking to Great Eastern, but it looks unlikely that it will use its vessels for Iranian oil imports.”

Limited Protection

The EU insurance ban has proved to be an effective tool at disrupting Iran’s oil sales.

Iran has been forced to shut off wells at its vast oilfields and reduce output to levels unseen in more than two decades as sales fall and storage space runs out.

Iranian oil shipments to China are mired in a dispute over freight terms which has threatened the flow of crude. Insurers in Japan, Iran’s third-biggest oil buyer, are expanding their maritime coverage to allow domestic tankers to transport Iranian crude, industry sources have said.

MRPL has an annual shipping contract with GESC. Indian insurers will only give shipping firms carrying Iranian oil $50 million per tanker in protection and indemnity cover, a fraction of the typical $1 billion in insurance that Western firms provide for a very large crude carrier.

Indian insurers will also give $50 million cover for any damage to the ship.

India has already cut its Iranian oil purchases by more than a fifth to win the waiver from US sanctions, and was scheduled to load around 300,000 barrels per day this month according to provisional figures seen by Reuters.

MRPL’s first July cargo from Iran is in the NITC (National Iranian Tanker Company) aframax Magnolia, which is scheduled to reach New Mangalore Port next week, one of the sources said.

Private energy firm Essar Oil, which is not restricted by the government’s shipping and insurance regulations on Iran, on Wednesday received 2 million barrels of oil in an NITC tanker.

State-run refiner Hindustan Petroleum is scheduled to receive an oil cargo aboard an Iranian suezmax next week, a company source said. The vessel was booked before the government withdrew its permission to ship Iranian oil in Iranian tankers.

Source : videos.livemint.com