India will ensure its refiners have insurance for plants that run crude from Iran, a government source said on Wednesday, allaying fears that imports from the sanctions-hit country may have to be halted.
State-run refiner Hindustan Petroleum Corp said on Tuesday it might not be able to use Iranian crude at its plants from June if insurers refused to renew contracts on its plants because of western sanctions.
India, one of Tehran’s biggest clients and heavily reliant on oil imports, has already had to organize emergency cover for ships carrying Iranian crude after sanctions made it difficult for domestic insurers to secure reinsurance.
“As long as it is for Indian consumption, why shouldn’t we?” said the source, when asked if India would arrange insurance for refineries that process Iranian crude.
“Oil is as basic as food. Just as you need food, you need oil,” added the source, who declined to be named because of the sensitivity of the matter.
The source did not give details, however, on how the insurance would be arranged or how much cover would be offered.
The sanctions, which target Iran’s oil revenues and financing, have blocked European and U.S. companies from deals with Tehran in virtually every non-essential sphere, including insurance.
Although Indian insurers do not fall directly under the sanctions, they depend on the Western reinsurance market to hedge their risk.
India’s emergency insurance for ships, however, totals only a fraction of the $1 billion coverage that a supertanker would typically get from reinsurers against pollution and personal injury claims, and only one ship has so far used it for deliveries from Iran.
HPCL is Iran’s third-largest Indian client and has lifted about 46,000 barrels per day (bpd) in the current contract year that ends on March 31.
Indian insurers have told fellow state-run refiner MRPL that they will fully cover its facility to handle larger crude vessels only if it gives an undertaking not to use the single point mooring for vessels carrying Iranian crude.
MRPL is Iran’s biggest client in India alongside privately owned Essar. While state-run refiners sell all their petroleum products on the domestic market, Essar exports some of its output.
The source did not clarify whether Essar’s facilities would be covered by any emergency insurance.
An Essar spokesman declined to comment. (
Editing by Jo Winterbottom and Jane Baird)