Indian refiners in limbo over Iran crude

Uncertainty over impending US sanctions against Tehran have so far prevented two Indian state-owned refiners from buying Iranian crude for October delivery.

The Indian government has said it is determined to carry on importing Iranian crude. Last week, US secretary of state Mike Pompeo, visiting Delhi, said Washington would consider waivers on the embargo but made clear that these would be time limited, if granted. But an official at an Indian state-run refiner told Argus that the government has issued no advice to refiners as yet.

That leaves refiners IOC and MRPL in a bind. Indian refiners buying from Iran benefit from 60 days credit, terms not available from suppliers of substitute crudes — Saudi Arabia, Kuwait, Iraq, Nigeria and the US. But with sanctions implemented in the first week of November, banks are unwilling to handle payments due after that date. Additionally, Iranian crude is bought on a cif basis and shipped on Iranian tankers and that will not be possible once sanctions kick in because there will be no payment mechanism.

But another big state-owned refiner BPCL has stopped buying Iranian crude for a different reason.

BPCL contracted for around 4mn t (80,000 b/d) of Iranian crude for the 2018-19 fiscal year. That includes 1mn t for the Oman-BPCL joint venture Bina refinery. Of the remaining 3mn t destined for Mumbai and Kochi refineries, 1mn t is firm and 2mn t optional. The refiner has taken all of the firm volumes already, as well as around 1.5mn t of the optional volumes. It has no need of the remaining 500,000 t of optional crude because it has stocks of high sulphur crudes that were to run at Mumbai refinery but are unused because of the fire at the 5,900 t/d hydrocracker unit there. The hydrocracker lies shut. So BPCL has no need for Iranian crudes and so has not booked any cargoes for October. The hydrocracker will restart by December. Otherwise Mumbai refinery working at full capacity.

India's other state-owned refiner HPCL has not been a significant buyer of Iranian crude.