New Delhi — Indian Oil Corp., the largest buyer of Iranian crude in India, will look to buy more barrels from Saudi Arabia, the US, Kuwait, the UAE and Mexico to replace Iranian imports, senior IOC officials said Friday.
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India's flagship state-run refiner, has put in place "a robust sourcing plan" to replace Iranian volumes after the US lifted sanction waivers on key customer of Iran's oil last month, Chairman Sanjiv Singh said. "We have optional volumes to buy from a number of our long-term suppliers."
Singh, speaking to reporters at a press briefing, said it had secured deals to import an additional 4.6 million mt of US crude to help it replace just over half of its Iranian imports. Out of this production, 3 million mt will be supplied by Norway's Equinor while the remaining 1.6 million mt will be sourced from Algeria's Sonatrach.
Iran has been the third-largest supplier of crude to India after Iraq and Saudi Arabia. IOC relied on about 9 million mt, or 180,616 b/d, of Iranian crude in the fiscal year ending March 31, according to IOC. Total Indian imports during this period were around 24 million mt, or 481,643 b/d.
Singh said IOC will import an addition 1.7 million mt from Saudi Arabia from July to December. This will be above the current 5.6 million mt of Saudi crude it is currently importing on a term contract which is valid till March 2020.
A.K. Sharma, IOC's director of finance, added: "We will have a monthly option window open for Saudi crude for 2 million barrels each for a six-month period beginning July."
As part of this plan, IOC has an option to buy 1.5 million mt from Kuwait and 1 million mt from the UAE on top of its term commitments. Mexico will also supply an extra 700,000 mt during this period if need, 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 it. The US, however, granted a six-month waiver from sanctions to India, China, 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 expired on May 2.
India, which is the world's third-largest importer of crude, relies heavily on Iranian supplies, of which it is the second-largest buyer. The halting of the sanctions waiver has meant Indian refiners have had to look elsewhere for Iranian supplies. Iranian oil is very attractive for Indian refiners as Iran allows it 60 days credit on oil purchases, along with some freight discounts. This makes Iranian crude very price competitive especially in a time of higher oil prices amid a very tightly supplied market.
India is expected to make a final decision on Iranian oil imports after the general election is over, oil ministry officials said this week. India is undertaking a seven-phase general election, with results expected after May 23.
On Tuesday, Indian external affairs minister Sushma Swaraj and Iranian foreign affairs minister Javad Zarif met in New Delhi to discuss the US sanctions. Zarif's two-day visit from Monday was part of Tehran's outreach program to brief key countries such as India, Russia, China, Turkmenistan and Iraq about the latest situation arising out of the US sanctions. The Iranian minister was briefed about India's stand on crude imports, said people familiar with the meeting. They said the prime criteria to buy crude from Iran in days ahead would be commercial consideration, strategic relationship and energy security.
The meeting follows discussions last week in the Indian capital between US Commerce Secretary Wilbur Ross and Indian commerce minister Suresh Prabhu about issues related to the US sanctions.
Iran mainly produces crude that is heavy and medium but sour -- high in sulfur -- and is widely used by complex refineries. These crudes boast of high specific gravity or density and when refined yield a high volume of gasoil and fuel oil.
The US mainly produces light, sweet crude but there are some US sour crudes like Mars and Poseidon similar to Iranian.
Iran also produces and exports ultra-sweet low sulfur oil or condensates, especially from South Pars, and this is similar to condensates produced by Norway, Qatar, the US and Australia.
The global crude market has tightened considerably due to Venezuelan and Iranian crude exports slumping sharply in recent months, along with OPEC cuts. This has driven the cost of replacement grades like Saudi Arab Medium and Russian Urals higher.
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