Iran halts supplies of oil to India over $5 billion debt
Iran has halted exports of crude oil to five of India’s refiners as a result of an impasse over the payment of $5 billion for previous supplies, according to company executives and government officials.
OGJ Oil Diplomacy Editor
LOS ANGELES, July 22 -- Iran has halted exports of crude oil to five of India’s refiners as a result of an impasse over the payment of $5 billion for previous supplies, according to company executives and government officials.
Mangalore Refinery & Petrochemicals Ltd., Hindustan Petroleum Corp. Ltd., Bharat Petroleum Corp. Ltd., Indian Oil Corp. Ltd., and Essar Oil all purchase oil from Iran, and their collective debt to Iran now stands at the alarming multibillion-dollar sum.
Iran earlier stated that, despite the outstanding debt, it would continue to supply all of the Indian firms with oil in an effort to avoid losing its market share to rival producer, Saudi Arabia.
"Exporting oil to India, one of our traditional and long-term customers, will continue," said Mohammad Aliabadi, Iran's caretaker oil minister. "India will solve the problems about the payments for oil exports within the next 1 or 2 months," he said (OGJ Online, July 18, 2011).
Despite that statement, none of India’s five refiners has received a crude supply plan from Iran for August loading cargoes, according to Indian officials and executives at the companies, as well as other sources.
"BPCL, HPCL, and Essar have told us that they have not received allocation (from Iran for August). They did not get a response from Iran and they want to secure supplies," said an executive with Aramco who requested anonymity.
That view was confirmed by K. Murali, head of refineries and international trade, for India's state-owned refiner Hindustan Petroleum Corp. Ltd. "We have not got allocation for August. They said the payment issue has to be resolved first," said Murali.
"We will draw more from other suppliers with whom we have term deals. The year has just begun," Murali told Reuters, adding that HPCL has made adequate arrangements to replace Iranian volumes for August.
"As of now it suffices. We are going by rolling plan month by month," said Murali, who also confirmed earlier reports that HPCL has sought an additional 1 million bbl of oil for August from Aramco.
Another refiner, also requesting anonymity, already has made alternative arrangements after hearing nothing from Iran following a June 27 letter that threatened to halt supplies over the payment issue.
"Since there was no communication from Iran after June 27, we assumed there would not be any supplies in August and accordingly made arrangements. They have not made any allocation for us," said an executive of the refining company.
India’s Oil Minister S. Jaipal Reddy downplayed any concerns over a shortage resulting from Iran’s decision to halt its regular supply of 400,000 b/d in August. "There will not be any shortage or problem,” said Reddy, adding, “We have a back-up plan.”
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