Domestic oil refiners such as Mangalore Refinery and Petrochemicals Ltd (MRPL)can now look at sourcing crude oil from Iran without much hassle — if Tehran is able to comply with the nuclear deal it reached with six world powers on Sunday in exchange for partial lifting of sanctions.
However, oil traders and refiners Business Line spoke to said “the devil lies in the detail”, as sanctions will be reimposed on Iran if it does not meet its commitments during the six-month period covered by the interim deal.
“If all goes well, it will be a relief for oil importers. Besides MRPL and Essar, other Indian refiners can tap Iranian crude oil without many issues,” said P. P. Upadhya, Managing Director of MRPL.
However, Indian refiners still need clarity on the insurance issue, said Upadhya.
Risk involved
Imports from Iran were hit by issues over re-insurance rather than the sanctions. Though Indian insurance companies are not governed by the US and EU sanctions, they depend on reinsurers from the West because of the high risks involved in crude oil imports.
The sanctions against Iran’s disputed nuclear programme discouraged global re-insurers from taking on the risk.
MRPL and Essar Oil are the two main importers of Iranian crude oil. While the sanctions adversely impacted MRPL’s sourcing, Essar continued to do so “cautiously”.
MRPL, an ONGC subsidiary, resumed imports from Iran in August after a lapse of four months because of the insurance issue.
It proposes to close the current fiscal with imports of 4 million tonnes (mt) from Iran, higher than the previous fiscal year’s 3.9 mt.
MRPL had reduced crude oil imports from Iran to 6.3 mt in 2011-12 from 7.1 mt in 2010-11.
Last year, India slashed its imports from Iran by more than 25 per cent, to 13.14 million tonnes.