Mangalore Refinery and Petrochemicals (MRPL), which imports a fourth of its annual crude oil requirement from Iran, is exploring the option of long-term contract with the US apart from increased sourcing from Saudi Arabia, Iraq, UAE, Kuwait and west African countries, given imports from the sanction-hit country will have to be stopped starting May 2.
“Going forward, we will explore import options from the US by evaluating the economics of handling US crude,” said M Venkatesh, managing director at MRPL, adding that all options are open and the company will opt for the most viable option.
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In 2017-18 crude processed by MRPL, a subsidiary of ONGC, stood at 16.31 million tonne. The company has an annual deal to buy 4.5 million tonne of oil from Iran with an option to buy an additional 1 million tonne. However, US President Donald Trump on Monday declared that the country will not extend the waiver for existing importers of Iranian oil beyond the initial six months, which means MRPL will have to look for alternatives.
Venkatesh, though, added that the company — which relies mostly on imported crude as it is situated away from crude oil production facilities — will prefer supplies from West Asian countries over others. “Supplies from West Asia takes around 7-8 days compared with 45 days from Latin American producers,” he added. Supplies from West Asia make up for more than 65% of the requirement of MRPL and sourcing is done through term contracts.
In the wake of the impending threat of no supply from Iran, MRPL in 2017-18 processed two new varieties of crude — Qarun Blend from Egypt and South Green Canyon from the US on a trial basis. The company, in its annual report for 2017-18, had said: “The recent developments surrounding Iran and imminent US sanctions and pressure on India to reduce imports from Iran point towards a significant short-term supply risk to the company.” However, Venkatesh it will not be difficult to replace Iranian crude, given the company has now spread its sourcing options.
While the buzz was around for a while, Trump reimposed sanctions on Iran last year by revoking the deal between the Persian Gulf nation and other European nations apart from the US signed in 2015. While some sanctions came into effect immediately on August 6, 2018, oil sale related sanctions came into force from November 2, 2018. However, eight nations, including India, were given waiver till May 2 to import restricted quantity of crude oil from Iran.