Iran has offered insurance to Indian refiners in a bid to boost its crude sales, industry sources said, though some oil executives warned the plan would not remove the threat of western sanctions.
The offer was made during a visit to India led by Iranian Oil Minister Rostam Qasemi in a bid to revive crude sales from its second-largest customer. U.S. and European Union sanctions, aimed at choking off oil money and forcing Tehran to curb its nuclear programme, halved Iran’s crude exports in 2012, costing it as much as $5 billion a month.
Those measures have forced Indian refiners to reduce imports because local insurers have said they can no longer cover plants that process Iranian crude. Other buyers such as South Korea may have to follow suit.
The delegation led by Qasemi arrived on Sunday with the aim of persuading New Delhi to step up both oil imports and investment in the OPEC-member’s oil and gas sector.
“They (Iran) said they can provide insurance for our refineries,” said a source on Monday, after a meeting between Qasemi and India’s Oil Minister Veerappa Moily.
Qasemi confirmed the talks on the energy sector but provided no further details.
INDIA DECLINES OFFER
Taking up the Iranian offer would not be a solution to the insurance problem, said two oil company executives, declining to be identified as they are not authorised to talk to the media.
“Iranian insurance companies are under sanctions, how can I take cover from them?” asked one of the executives.
Also, refiners have to cover plants and equipment worth billions of dollars, and typically have a composite policy covering ongoing projects, supply installations, plants and cargoes. As such, it would not be possible to break down coverage for just refineries, the second source said.
“We take a mega policy from local insurers every year and it covers everything,” the source said. “It is not possible to have coverage only for refineries from Iran.”
India, along with other top Asian buyers of Iranian oil, is awaiting its third six-month exception to sanctions from the United States. With the renewal due in June, the Indian government is unlikely to allow refiners to take cover from Iran, the second source added.
Two refiners – Hindustan Petroleum Corp, and Mangalore Refinery and Petrochemicals Ltd – halted Iranian oil purchases in April over the insurance problems.
India cut imports of Iranian oil by 26.5 percent in the fiscal year ended March 31 from the previous year. Its April imports from Iran were down 56.6 percent from a year ago, according to data from trade sources.
Qasemi also offered a production-sharing contract to Indian companies to develop the Farzad B gas field in the Farsi block and asked New Delhi to boost exports to Tehran to fix a trade imbalance, sources said.
India in turn asked Iran to participate in tenders seeking oil supplies for its strategic storage, the sources said.
India aims to build its strategic oil storage at two places with a combined capacity of 18.55 million barrels in the first quarter of 2014.
“Both of us expressed our desire to continue with business with each other. We need to nurture business with them,” said India’s Moily after the meeting.
(Reporting by Nidhi Verma; Writing by Manash Goswami; Editing by Jason Neely and Tom Hogue)