India seeks extra oil from Saudi, but won’t shun Iran

Delhi readies alternate sources of supply against possible crisis

India has turned to Saudi Arabia to curtail its dependence on Iranian oil.

“We have sought additional 5 million tonne (mt) from the world’s largest crude oil supplier,” minister of state for petroleum and natural gas RPN Singh said after a meeting with Prince Abdul Aziz Bin Salman Bin Abdulaziz, assistant minister for petroleum affairs of Saudi Arabia, in New Delhi on Thursday.

India is caught in a catch-22 situation amid increasing pressure from the US to curb oil imports from Iran and the good diplomatic

ties that New Delhi shares with Tehran. India’s ties with the US have improved considerably over the past few years.

However, petroleum minister S Jaipal Reddy played down the development, and clarified that India would not cut crude supplies from Iran.

“Our relationship with Saudi Arabia is purely bilateral. It is our single biggest supplier. We have been seeking to increase supplies every year. It’s the same this year. It has no relationship to our ties with any other country, including Iran,” Reddy said.

Bloomberg News on Fe-bruary 21 said Iran was offering India extra crude supplies on revised terms as international sanctions tightened on the West Asi-an producer’s circle of oil customers.

Bin Abdulaziz said his country’s endeavour is to maintain the market “well supplied”. Asked about the impact on oil prices because of cut in supplies from Iran, he said, “We don’t engage ourselves in any of these discussions.”

Brent crude futures ha-ve zoomed ahead of $123 a barrel after the EU offered a second bailout package to Greece and Iran cut supplies to European nations.

Iran said it halted exports to British and French companies. Other buyers such as Belgium, the Czech Republic and the Netherlands are also not buying Iranian crude. Few others such as Greece, Spain and Italy are drastically cutting down on imports from Iran.

At present, India buys more than 27 mt of oil every year from Saudi Arabia, which is the biggest supplier of crude to India followed by Iran, Iraq and Nigeria.

Saudi is the only oil producer that has enough volume to meet any shortfall due to a possible supply cut by Iran. At present, the country has spare volume of 2.5 million barrels a day compared with its total daily output of 9.8 million barrels.

India is one of the biggest buyers of crude from Iran and enjoys 90-day credit facility. Recently, the two nat-ions agreed to settle 45 per cent of crude bill in rupees. India buys 18 mt of crude oil from Iran every year.

However, increasing tensions between the US and Iran has made trade tough not only for India, but also other countries such as China and Japan that buy large volumes of oil from Iran.

India, China and Japan buy around 45 per cent of crude oil produced in Iran. Amid increasing sanctions on Iran, these countries are looking to gradually reduce sourcing of crude by at least 10 per cent in 2012-13.

The US and EU have imposed sanctions on Iran by restricting trade to put pressure on the oil producer in a bid to stop its nuclear programme. However, India has maintained that it would not abide by any sanctions imposed by a particular nation or group, unless notified by the UN.

India imports more than 80 per cent of crude requirement and it is important for the country to have stable supplies to avoid any shock to the domestic economy. At present, Indian refiners can process 193 mt of crude oil annually. This will rise to 232 mt by the end of 2012.

Singh also discussed with Bin Abdulaziz the issue of LPG import from Saudi Arabia and MRPL’s request for supply of crude on the basis of its parent company’s guarantee instead of letter of credit, an oil ministry statement said.