* Indian refiners await New Delhi action on reinsurance fund
* HPCL taking Iraqi barrels as replacement for Iran oil
By Nidhi Verma
NEW DELHI, April 3 Indian state-owned refiner
MRPL has asked for more Saudi Arabian oil in April, according to
an industry source close to the matter, as it awaits clarity
from India's government on how it will insure plants using crude
from sanctions-hit Iran.
Indian insurers said in February they could no longer cover
refineries processing Iranian oil as European reinsurers had
stopped helping them hedge their risk. New Delhi and industry
officials have been considering establishing a domestic
reinsurance scheme, but it is unclear how that would be funded.
Mangalore Refinery and Petrochemicals Ltd (MRPL)
and Hindustan Petroleum Corp have both said they will
halt oil imports from Iran in April if insurance cover is not
available for their refineries.
Europe and the United States introduced tough sanctions last
year targeting Iran's oil exports to force the Islamic nation to
the negotiating table over its disputed nuclear programme. Those
sanctions gave rise to a similar reinsurance issue that stopped
non-Iranian shipowners from carrying Iranian oil.
MRPL, Iran's biggest Indian customer, has asked for an extra
23,000 barrels per day (bpd) of oil from Saudi Aramco for April,
after already increasing its annual contract to 55,000 bpd for
the fiscal year ending March 31, 2014, the industry source said.
The volume including the extra barrels would be around 70
percent higher than the 46,000 bpd that MRPL took from Saudi
Aramco in 2012/13, the source said.
HPCL is turning to Iraq to replace Iranian barrels it won't
be lifting from April.
HPCL doesn't want a firm contract with Iran for 2013/14 but
wants an option to take up 20,000 bpd, about 57 percent lower
than last year, according to company sources.
"At this stage we don't want a firm contract with Iran as
one or the other problem is always there," said an HPCL source.
HPCL aims to buy 60,000 bpd oil from Iraq's State Oil
Marketing Organisation (SOMO) in 2013/14, up from about 45,000
bpd in the last fiscal year.
It is also looking at signing an annual deal with Total to
buy about 40,000 bpd Basrah crude oil, sources earlier told
Indian Oil Corp, the country's biggest refiner,
plans to ship in two million barrels of oil from Iran this
month. IOC's refinery insurance policy is not due for renewal
until November, a company source said.
State refiners have made provisions for Iranian crude in
their annual import plans, but those are pending a decision from
the government on resolving the insurance problem.
On Wednesday, oil ministry and industry officials are due to
meet to discuss the reinsurance issue.
Oil Secretary Vivek Rae last month said that Indian insurers
and the Oil and Industry Development Board (OIDB) under the
federal oil ministry may jointly set up a fund to back local
A government source said initial talks included a proposal
for insurers and OIDB to contribute 10 billion rupees ($184.21
million) each for the planned reinsurance scheme. That may not
be enough to cover an accident or incident at a refinery, and it
is unclear how the rest would be funded.
"An incident in MRPL can cost about 50-60 billion rupees and
at Essar it will be about 100-120 billion rupees ... You have to
have this kind of financial muscle to provide cover," said the
The Indian Express Newspaper last week reported that the
federal government could extend a sovereign guarantee of up to
100 billion rupees. The finance ministry declined to comment.
Indian state refiners are planning to import 124,000 bpd
Iranian oil in 2013/14, about 20 percent less than last year,
provided sanctions against Iran are eased or if the Indian
government steps in to provide reinsurance.
India, the world's fourth biggest oil consumer, wants to
retain the shrinking volumes of Iranian oil in its crude supply
mix to help feed its expanding refining capacity.
In February, India's total imports of Iranian crude were
about 259,000 bpd, down nearly 43 percent from a year ago.
($1 = 54.2850 Indian rupees)
(Reporting by Nidhi Verma; Editing by Tom Hogue and Simon Webb)