The threat of Iran halting crude oil supplies from next month has prompted domestic refiners to explore additional supplies from Saudi Arabia.
Iran supplies 12 per cent of India’s crude oil requirements,. It has indicated it will stop supply of crude from August if pending payments were not made.
Iran supplies 21 million tonnes yearly, the second biggest supplier after Saudi Arabia. Domestic refiners, including Mangalore Refinery and Petrochemicals (MRPL), Essar Oil, Hindustan Petroleum, Indian Oil and Bharat Petroleum, owe around $5 billion to Iranian suppliers and have not received the supply plan for August from the National Iranian Oil Company.
MRPL, the largest buyer of Iranian crude at 142,000 barrels a day, has sought additional volumes from Saudi Arabia to meet the shortfall, said industry officials. They said Essar has already made arrangements for alternate supplies for almost two-thirds of the 110,000 bpd oil it had contracted with Iranian oil companies. HPCL is talking to Saudi Arabia and the UAE to make up for the shortfall.
Oil minister S Jaipal Reddy was quoted by Reuters on Thursday saying there will be no oil shortage as a fallout of the Iranian crisis. “No. There will not be any shortage or problem. We have a back-up plan,” said Reddy.
Iran has been selling crude oil on credit to India since late December 2010, when the Reserve Bank of India had stopped the use of the Asian Clearing Union (ACU) mechanism. The RBI action followed a new EU directive that required certification of all trade transactions with Iran.
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ACU was established with its headquarters at Teheran, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), for promoting regional co-operation.
The main objective of a clearing union is to facilitate payments among member countries for eligible transactions on a multilateral basis, thereby using foreign exchange reserves prudently, as well as promoting trade among the participating countries. The idea was to prevent weakening of the local currencies.
Besides India and Iran, Bangladesh, Bhutan, Nepal, Pakistan, Sri Lanka, Myanmar and Maldives are members of the ACU.