India's Chennai Petroleum will stop
processing Iranian crude oil from October to keep its insurance coverage once
new sanctions by the United States against Iran go into effect, three sources
familiar with the issue said.
Iran's Naftiran Intertrade Co Ltd, a trading arm for state-owned National Iranian
Oil Co, owns a 15.4 per cent stake in Chennai Petroleum, which has two
refineries with a total combined capacity of 230,000 barrels of oil per day
Washington is pushing allies to cut
Iranian oil imports to zero once the sanctions on the petroleum sector start up
on November 4.
United India Insurance has informed Chennai
Petroleum that its new annual policy that is set to take effect from October
will not cover any liability related to processing crude from Iran, the three
sources said. This has forced the refiner to cancel a scheduled loading of 1
million barrels in October, they said.
Indian insurers do not fall directly under the
sanctions, but need to hedge their own risk on the Western reinsurance market, which
will not accept Iranian exposure. They have said, according to a source,
that they cannot provide full 100 percent cover but only 85% cover.
Chennai Petroleum's reduced demand will further
cut India's imports from Iran to about 10 million tonnes in October, lower than
previous estimates reported by Reuters
Chennai Petroleum, a subsidiary of the country's
biggest refiner Indian Oil Corp (IOC), has a deal to buy up to 2 million tonnes,
or 40,000 bpd, of oil from Iran in the fiscal year 2018-19.
IOC imports oil on behalf of Chennai
Chennai Petroleum and United India Insurance did
not respond to requests for comment.
With Chennai's absence, Iran is left with just
two Indian clients, Managalore Refinery and Petrochemicals Ltd, and IOC.
State-owned refiner Hindustan Petroleum Corp
has already halted purchases due to insurance problems, while Bharat Petroleum
Corp boosted Iranian purchases earlier this year and expects to sharply cut
Iranian flows once the sanctions take effect.
Nayara Energy is also preparing to halt Iranian
imports from November, while Reliance Industries and
HPCL-Mittal Energy Ltd have already stopped buying Iranian oil.