Reliance cuts ’09 Iran crude imports 25%

Reliance cuts ’09 Iran crude imports 25%
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First Published: Mon, Feb 23 2009. 05 31 PM IST
Updated: Mon, Feb 23 2009. 05 31 PM IST
Dubai / Singapore: India’s Reliance Industries will import about 25% less crude oil on contract from Iran in 2009, sources familiar with the supply deal said on Monday.
Reliance will buy 90,000 barrels per day (bpd) of Iranian crude on term contract this year, down from 120,000 bpd in 2008, oil industry sources said.
It was unclear why India’s largest refiner would cut contract purchases from the world’s fourth-largest oil exporter in a year when Reliance needs more crude to feed its giant new 580,000 barrels per day (bpd) Jamnagar refinery.
Reliance did not respond to Reuters enquiries on the reduction, while Iranian officials declined to comment.
The reduction may be a sign that Iran is writing lower supply into its annual contracts due to curbs agreed with the Organization of the Petroleum Exporting Countries, said Victor Shum, analyst with consultancy Purvin & Gertz in Singapore.
“It could be due to the OPEC production cuts,” Shum said. “There is simply less oil around, even if Iran may not have fully complied with the intended cuts, but there has been cuts.”
OPEC has agreed cuts of 4.2 million bpd since September. Iran’s share of the reductions was around 560,000 bpd.
In January, Iran cut supplies to Asia by 14%, the first reduction to its core Asian customers in at least three years.
Previously, Iran had cut spot sales of crude rather than reduce contract volumes.
POOR QUALITY
Reliance may have decided that the quality of crude from Iran was too poor to warrant the prices Tehran wanted, trade sources said.
Among the grades which Reliance has purchased were the heavy and acidic Soroush and Nowruz crudes from Iran’s offshore fields. The new Jamnagar refinery can process the oil, but with a glut on the market as the global economy slows, Reliance may have opted for better grades widely available.
“Soroush has very poor qualities which reduces its attractiveness even to complex refiners like Reliance, kitted to process this type of rough material,” one Asia-based crude trader said.
Politics might also have played a role in the decision, some traders said.
US major oil firm Chevron owns 5% of the Jamnagar refinery and has an option to take a bigger stake. US refiners are forbidden from buying Iranian crude under sanctions in place.
“Some political pressure could have reached Reliance,” Shum said. “Some members of the US Congress have complained about Reliance supplying gasoline to Iran.”
In December congressman Brad Sherman, together with a bipartisan group from the US House of Representatives, sent a letter to the head of the US Export-Import Bank urging it to suspend financial aid to Reliance unless the Indian firm agreed to stop selling gasoline to Iran.
The US bank had approved two loan guarantees to Reliance worth $900 million that included a $400 million facility issued in August to help finance the Jamnagar refinery.
The refiner shipped 750,000 barrels of fuel to Tehran in January.
Reliance has kept silent on which crudes it will buy for the new refinery. The Indian company already buys from across the globe, with suppliers including Latin American, African, and Middle Eastern oil producers.
Jamnagar could also buy Chevron’s Gulf of Mexico crude output, one industry source said.
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First Published: Mon, Feb 23 2009. 05 31 PM IST
More Topics: Reliance | Crude | Import | Iran | Oil |