The lifting of a European Union ban on insuring tankers carrying Iranian crude as part of a nuclear deal reached in Geneva today will ease the process of importing the Persian Gulf state’s oil, according to Indian refiners.
While officials from Indian Oil Corp., Hindustan Petroleum Corp. and Mangalore Refinery & Petrochemicals Ltd. said the removal of restrictions on shipping cover will enable them to purchase contracted volumes more easily, they said they don’t intend to buy more than previously planned.
“We can go ahead and import the contracted volume for this year,” said Rajkumar Ghosh, the director of refineries at Indian Oil, the country’s largest processor. The company has a deal to buy 1.2 million metric tons of Iranian oil in the year ending March 31, of which 0.5 to 0.6 million tons have been imported since April, he said. Middle East suppliers sell the bulk of their crude in long-term contracts.
The end of the EU ban is part of a first-step agreement that will give Iran as much as $7 billion in relief from economic sanctions over six months. In return for limiting its nuclear program, the interim deal provides for the release of $4.2 billion in frozen oil assets and will let Iranian oil exports continue at current levels, rather than requiring continued reductions by buyers, according to a White House statement. It won’t mean an increase in shipments after they were cut by 60 percent since 2012, the U.S. administration said.
The insurance restrictions affected about 95 percent of the global tanker fleet because the ships are covered under rules governed by European law. Carrying Iranian oil would invalidate ships’ insurance against risks including spills and collisions, according to the International Group of P&I Clubs. The Japanese government started providing sovereign cover for its tanker operators while India was due to consider a 20 billion rupee ($320 million) fund to help cover imports.
“This is a precursor to overall easing of Iran sanctions,” P.P. Upadhya, the managing director of Mangalore Refinery & Petrochemicals, said by phone. “We are importing about 500,000 tons every month since August, so we should reach our 4 million-ton plan by March.”
India’s crude imports from Iran are expected to total 11 million tons in the twelve months ending March 31, a drop of about 15 percent from the previous year, Petroleum Secretary Vivek Rae said Nov. 8.
Hindustan Petroleum plans to import 0.8 million tons of Iranian crude by March if it can begin shipments next month, B.K. Namdeo, director of refineries at India’s third-largest state-run refiner, said today. The country’s processors are unlikely to exceed their targets in the current financial year, he said.
“We will be able to start importing Iran crude even without the government’s insurance pool,” Namdeo said.
In June 2012, there were 23 importers of Iranian crude; today, only six remain - China, India, South Korea, Japan, Turkey and Taiwan, according to U.S. officials. Since July 2012, the EU has also banned oil imports.