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Indian firm ups Saudi imports amid Iranian sanctions

17th July 2012

Top Iranian crude buyer, Mangalore Refinery and Petrochemicals looks for alternatives

Indian firm ups Saudi imports amid Iranian sanctions
MRLP’s measures follow the Indian government’s decision in May to cut oil imports from Iran by 11 per cent to 113.6 million barrels

Indian oil giant Mangalore Refinery and Petrochemicals Limited (MRPL) will buy crude from Saudi Arabia, UAE and Azerbaijan amid pressure on Tehran from Western countries to drop oil imports from the Islamic Republic.

MRPL, the subsidiary of India’s oil firm ONGC Videsh and Iran’s single top purchaser of oil, has been forced to restrict its planned purchase of 3.3 million barrels of oil from Iran for July to a fifth of the amount, according to reports.

In an attempt to offset the loss, MRLP inked an oil deal with Azerbaijan and will purchase an additional supply from the UAE and Saudia Arabia, with whom it holds annual deals to lift 40,000 bpd and 49,000 bps, respectively.

MRLP’s measures follow Delhi’s decision in May to cut oil imports from Iran by 11 per cent to 113.6 million barrels for the financial year ending March next year. The measure secured India a place in the US’ sanctions waiver list.

However, oil imports from Iran will likely continue. An agreement between New Delhi and Tehran recently came into effect, whereby India will pay for nearly half of its purchases with rupees. US sanctions have made it difficult for India to pay its imports with dollars.

“The oil companies have started to put the money in the rupee account and the flow of trade has started. They have deposited about USD 550 million,” said Rafique Ahmed of the Federation of Export Organizations of India. “They are expecting more flow of money to come in.”

The agreement will help increase bilateral trade between the two countries, as Iran scouts for goods in India’s domestic market.

In 2011, India was the second largest importer of Iranian crude oil at 341,000 bpd, after China (543,000 bps). Iran’s overseas sales have more than halved since last year.

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