Indian refiners including Mangalore Refinery & Petrochemicals Ltd. may be forced to halt purchases of Iranian crude as local insurers refuse to cover the risks for any refinery using that oil, a company executive said.
“There’s a problem with getting insurance for refineries processing Iranian oil,” Mangalore Refinery Managing Director P.P. Upadhya said by phone from his office in the southern city of Mangalore. “If there’s no clarity very soon, we all have to stop buying from Iran or risk operating the refineries without insurance.”
Mangalore Refinery has sought direction from India’s oil ministry on future purchases of Iranian crude, Upadhya said. The company, India’s biggest buyer of Iranian crude, will purchase 76 percent of the contracted 5 million metric tons a year of crude from Iran in the year ending March 31 and next year’s imports will depend on securing insurance, he said.
India has struggled to get tankers and insurance for transporting supplies from the Persian Gulf state after the U.S. and the European Union imposed sanctions on Iran to curb its nuclear program, which they say is designed to develop an atomic weapon. The U.S. in December renewed a waiver for India and eight other nations from a law that cuts institutions off from its banking system if they process payments for Iranian oil.
India will reduce Iranian crude purchases to about 15 million tons, or about 300,000 barrels a day, in the current financial year, then Oil Minister S. Jaipal Reddy said in Dubai on Oct. 22. Purchases in the nine months to Dec. 31 totaled 9.69 million tons, P. Lakshmi, a junior oil minister, said in a written reply to questions in lower house of Parliament Feb. 22.
The country bought 17.5 million tons in the prior 12 months, about 10 percent of its needs, according to data from the Associated Chambers of Commerce and Industry of India.
Another set of U.S. sanctions that started Feb. 6 requires buyers of Iranian oil to pay in local currency to escrow accounts and will bar Iran from repatriating the funds. Indian government officials have previously said the country isn’t bound by U.S. and EU measures and will only adhere to sanctions imposed by the United Nations.
Reuters reported similar comments from the Mangalore Refinery executive earlier today.