Mangalore Refinery and Petrochemicals Ltd (MRPL) has said the US sanctions on Iran can impact the profitability of the company.

The annual report for 2017-18 said that the sanctions on Iran is an immediate threat to profitability. The reduction in supplies of crude from Iran will have an impact on crude prices globally and will affect the company also in the short-term, it said.

West Asia is the principal source of crude for MRPL with more than 65 per cent of the requirements being sourced through term contracts.

“Of these, the National Iranian Oil Company (NIOC) supplies around 25 per cent of the crude to our company through a term contract. The recent developments surrounding Iran and imminent US sanctions and pressure on India to reduce imports from Iran point towards a significant short-term supply risk to the company,” it said.

However, it said that MRPL is taking proactive steps to diversify the crude basket so as to reduce its reliance on a single geography to meet its crude oil requirement. MRPL has processed two new crudes — Qarun Blend from Egypt and South Green Canyon from the US — on a trial basis in this regard.

The company is also looking at other sources such as Australia, West Africa and South America to meet a part of its crude requirements to mitigate the risk of non-supply of specific crude due to the geo-political situation, it said.

The company also stated that supply of water, which is a vital input for the operations of the refinery, is one of the risks for it. “Water supply disruption occurred in the past during summer. This severely affected the operations of the refinery,” the annual report said.

The company is setting up a desalination plant that will ensure water availability. The project, which has been cleared by the Karnataka government, is expected to be completed by 2020. The desalination plant, which has the capacity of 30 MLD is expandable up to 70 MLD will cater the immediate and future water requirements, it said.

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