India to stop importing oil from Iran; make up lost volumes from alternate sources

India to stop importing oil from Iran; make up lost volumes from alternate sources

New Delhi, Apr 23: India will stop importing crude oil from Iran following the US move to end sanction waivers, and will use alternate supply sources such as Saudi Arabia to make up for the lost volumes, top officials and industry sources said on Tuesday. The Trump administration on Monday decided not to renew waiver that let countries like India buy Iranian oil without facing US sanctions.
“Until the waivers are not restored, I don’t think India can buy oil from Iran. We will stop importing oil from Iran,” a top official said.
New Delhi is likely to press the US government for continuation of oil import beyond its expiry on May 2 in talks scheduled later this month, he said. “But purchases cannot be made in anticipation. We will not be importing any oil from Iran.”
India was the second biggest buyer of Iranian crude oil after China. It bought some 24 million tonnes of crude oil from Iran in the fiscal ended March 31 (2018-19). Iran supplied more than a tenth of its oil needs.
The shortfall will be made from alternate supply sources available in Saudi Arabia, Kuwait, UAE and Mexico.
Oil minister Dharmendra Pradhan in a tweet said “a robust plan for an adequate supply of crude oil to Indian refineries” is in place.
“There will be additional supplies from other major oil-producing countries; Indian refineries are fully prepared to meet the national demand for petrol, diesel & other petroleum products,” he said.
The oil ministry too in a statement said that a plan was in place to ensure supplies of crude oil from May when the waiver ends.
Indian Oil Corp (IOC) chairman Sanjiv Singh said refiners import crude oil from a wide range of sources and had been lining up alternate supplies for the past months.
The US was to take a decision on waiver extension this month and Indian refineries had prepared plans for all eventualities.
“We have alternate sources lined up to make up for any shortfall,” he said.
US President Donald Trump last year withdrew from the 2015 nuclear deal between Iran and world powers, and revived a range of sanctions against the Persian Gulf nation. It, however, granted a six-month waiver from sanctions to eight countries – China, India, Japan, South Korea, Taiwan, Turkey, Italy, and Greece – but with a condition that they would reduce their purchases of Iranian oil.
The waiver began in November 2018 and was to expire on May 2.
India had agreed to restrict its monthly purchase to 1.25 million tonnes to get the waiver. But since it had made robust purchases in the period prior to November 2018, India’s overall crude oil imports from Iran totalled nearly 24 million tonnes in 2018-19 as compared to 22.6 million tonnes bought in 2017-18.
“We have optional volumes (over and above the term contracts) from a number of suppliers which we can exercise to make up for any shortfall from Iran,” Singh said. “We can also go to the spot (or current) market to source crude.”
“As far as Indian Oil is concerned, supplies will not be a problem. We have already lined up alternate sources,” he said, adding the impact of the US decision may reflect on global oil prices which may temporarily go up.
IOC has the option to take 0.7 million tonnes of crude oil from Mexico on top of its committed purchase of 0.7 million tonnes during the year. From Saudi Arabia, it has an optional volume of 2 million tonnes on top of a term contract of 5.6 million tonnes.
Similarly, it has optional volumes of 1.5 million tonnes from Kuwait and another 1 million tonnes from the UAE.
“We have all the supplies tied up and I think globally crude will be readily available but it is difficult to say what the impact will be on price,” he added.