Saudi Arabia, Iraq, Kuwait and some other West Asian producers are feeding domestic crude oil refineries such as Mangalore Refinery and Petrochemicals Ltd (MRPL) and Essar Oil, which have either halted or cut supplies from Iran.
While MRPL, the largest importer of Iranian oil, stopped lifting supplies from Tehran since April, Essar Oil is still importing, though a much lower quantity. Another domestic refiner, Hindustan Petroleum Corporation, has also stopped supplies from Iran.
This was because domestic insurers had said that they would not settle the claims of refining units that use Iranian oil, as sanctions by the West against Iran’s disputed nuclear programme had discouraged global re-insurers from taking the risk.
Though Indian insurance companies are not governed by US and European Union sanctions, they do depend on reinsurance from their Western counterparts.
However, if India is able to work out a mechanism, then imports from Iran could resume, sources said.
Imports from Iran have fallen from 21.20 million tonne (mt) in 2009-10 to 18.50 mt in 2010-11, 18.11 mt in 2011-12, and 13.14 mt (provisional) in 2012-13. MRPL, which was importing 7 mt a year earlier, brought it down to 5 mt and closed 2012-13 with about 3.8 mt.
Essar Oil, which has been sourcing 5 mt from Iran, has also significantly cut imports. Though the exact numbers were not available, sources said 40 per cent of the total energy basket of Essar had comprised Iranian crude oil, which is now at 20 per cent.
While Saudi Arabia was the largest crude oil supplier to India in 2012-13, Iran continued to lose its position as the second-biggest supplier.
Meanwhile, Iran reportedly offered insurance to Indian refiners during the Iranian Oil Minister’s, Rostam Qasemi, visit to India. The Iranian side also encouraged India to increase crude oil purchase.
The two sides discussed the marine insurance charged by the Iranian insurance companies for shipment of oil to India and arranging ships for carrying out the voyage. They also discussed the issue of reinsurance cover for the composite insurance of Indian refineries, which has recently affected crude oil purchase from Iran.