Annual Crude Oil Purchase Contracts With Saudi Arabia And Iraq Will Make Up Shortfall

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New Delhi: A senior officials said that Indian oil companies like Indian Oil Corporation (IOC) have optional volumes built in their annual crude oil purchase contracts with suppliers like Saudi Arabia and Iraq that will be more than enough to make up for any shortfall in supplies from sanctions-hit Iran.

India had contracted to import about 25 million tonnes of crude oil from Iran in the fiscal year 2018-19 (April 2018 to March 2019), up from 22.6 million tonnes imported in 2017-18.

“We have optional volumes built in with all our term suppliers. These optional volumes can be taken at any time of the year and would be more than sufficient to make up for any shortfall that may arise because of US sanctions against Iran,” a top official at a state-run refiner said.

India, the world’s third-biggest oil consumer, meets more than 80 per cent of its oil needs through imports. Iran is its third-largest supplier after Iraq and Saudi Arabia and meets about 10 per cent of total needs.

US sanctions against Iran oil sector kick in from November 4 that will block all payment routes to the Persian Gulf nation.

Officials said supplies from Iran will not be a problem till month end, leaving only five months of contracted supplies at risk.

Those volumes can be easily covered by exercising optional volumes available in contracts with Saudi Arabia, Iraq and other suppliers.

“Every year when we sign term contracts with suppliers, there is an optional volume built in. This volume is to take care of any exigencies. Such optional volume is more than enough to make up for five months of Iranian oil supplies,” an official said. “We have all plans in place for supplement any lost Iranian volume.” Officials said Indian refineries will not be impacted even if Iranian oil imports were to completely stop, but New Delhi is keen to continue buying oil from its traditional ally.

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