Indian Refiners Said to Seek Saudi Oil Next Month as Iran Warns of Cutoff

By Pratish Narayanan and Anthony DiPaola - Jul 20, 2011

Indian refiners asked Saudi Arabian Oil Co. for at least one additional shipment in August as a payment dispute jeopardizes Iranian cargoes, four people with knowledge of the matter said yesterday.

Iran has told customers in India that they won’t receive shipments next month unless outstanding bills are paid, according to the people, who asked not to be identified because they aren’t authorized to speak to the media. Indian refiners have said global sanctions against Iran over its nuclear program have made banks unwilling to transfer oil payments.

Iran may stop oil exports to India starting Aug. 1, state- run Fars news agency reported July 18, citing an unidentified official in the Oil Ministry. The country hasn’t issued export permits for crude shipments to India for August, Fars said. India owed $5 billion for oil shipments, Iranian Central Bank Governor Mahmoud Bahmani said that day, according to the Islamic Republic News Agency.

Staff working for Ahmad Qalebani, managing director of National Iranian Oil Co. in Tehran, referred questions on the matter to Mohsen Qamsari, head of international affairs. Qamsari didn’t immediately respond to two calls to his office.

Saudi Aramco, as the world’s largest crude exporter, has told refiners in India it can replace some of the Iranian crude, people with knowledge of the situation said earlier this month. The Dhahran-based company didn’t respond to an e-mailed request for comment.
Second-Biggest Supplier

India imports about 21 million metric tons of crude from Iran annually, making it the country’s second-biggest supplier after Saudi Arabia, S. Sundareshan, a former Indian oil secretary, said on Dec. 30. Total oil trade between India and Iran is worth $9.5 billion a year.

R. Gopalan, a secretary in the department of economic affairs in India’s Ministry of Finance, declined to comment yesterday on the dispute.

The biggest Indian buyer is Mangalore Refinery & Petrochemicals Ltd. (MRPL) Other purchasers of Iranian crude include Essar Oil Ltd. (ESOIL), Hindustan Petroleum Corp. and Indian Oil Corp.

“Supplies are maintained based on an interim arrangement,” Mangalore Refinery, which buys about 7 million tons a year of crude from Iran, said in its 2010 annual report.

India voluntarily stopped channeling funds for Iranian oil through a bank in Germany, a government official said April 5.

Iran hasn’t yet given Indian refiners loading dates or shipping amounts for August, three of the people familiar said yesterday. Iran typically provides this information by the middle of each month for the following month’s supplies, they said.

To contact the reporters on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net; Anthony DiPaola in Dubai at adipaola@bloomberg.net

To contact the editors responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net; Stephen Voss at sev@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.