NEW DELHI: Indian refineries, awaiting US sanctions lifting, plan to make way for Iranian imports to resume by buying less crude oil in the second half of the year, company officials told Reuters.
The world’s third largest oil consumer and importer halted imports from Tehran in 2019 after former US President Donald Trump stepped down from a 2015 agreement and imposed sanctions on the OPEC producer over its controversial nuclear program.
US President Joe Biden’s administration and Iran have been involved in indirect talks to revive Tehran’s pact to curb its nuclear activities in exchange for the lifting of sanctions.
Analysts expect Iran to increase crude oil exports to 1.5 million barrels a day in the fourth quarter if the sanctions are lifted.
India was Iran’s second largest oil customer after China, buying up to 480,000 bpd in the fiscal year from April 2018.
Several Indian state-owned refineries, whose refineries are suitable for the crude oil, have committed to buying Iranian oil once the sanctions are lifted.
The state-run Bharat Petroleum Corp, which aims to tap 45% of its total imports on the spot market, will buy Iranian oil if the sanctions are lifted, a company spokesman said.
Iranian crude oil, which is rich in high-sulfur distillate, suits BPCL’s Kochi refinery and costs 2 to 2.5 US dollars per barrel less than comparable grades. The proximity of Iran means India also has lower freight costs.
Hindustan Petroleum Corporation (HPCL) also said it would buy Iranian crude if the price is right and it is suitable.
“HPCL will consider buying Iranian oil, subject to techno-economic suitability, when sanctions are lifted and the situation is conducive to commercial transactions,” said Chairman MK Surana.
Top refinery Indian Oil Corp also expects a reduction in spot purchases and can easily process about 2 million tons (14.6 million barrels) of Iranian oil this fiscal year, said a company source that refused to be named because it failed is empowered to speak to them media.
The IOC plans to buy 56% of its imports through fixed-term contracts this fiscal year.
Indian refiners have increased the percentage of spot purchases versus fixed-term contracts to take advantage of cheaper kegs available in a surplus market.
After the Iranian oil stall, Indian had diversified its imports and increased its stake in US oil.
An official with Mangalore Refinery and Petrochemicals Ltd said his company will also cut spot purchases and buy Iranian oil.
Resuming Iranian oil supplies will help India replace smaller supplies from Iraq and Kuwait, which are also members of the Organization of Petroleum Exporting Countries, which cut production to prop up oil prices.
India’s relations with Opec’s largest member, Saudi Arabia, came under pressure after it became known that the producer group’s production restrictions are harming consumers.
Tensions eased this month after Saudi Arabia oxygenated India to deal with a surge in Covid-19.