May 21, 2012:

NEW DELHI - Indian refiner MRPL secured coverage from an Iranian insurer for a crude cargo that arrived last week, becoming the first Indian firm known to have taken such action as Western sanctions tighten, sources with knowledge of the matter said. India is the world's fourth-largest oil importer and one of the biggest customers for second largest OPEC producer Iran's exports of 2.2 million barrels per day, but Western sanctions make it tough for Indian oil importers and shipowners to maintain access to Iran's crude market.

Indian insurers denied coverage to Mangalore Refinery and Petrochemicals for fear the action could fall foul of a pending European oil embargo against Iran. Tough new European Union sanctions aimed at stopping Iran's oil exports to Europe also ban EU insurers and reinsurers from covering shipments of Iranian oil anywhere in the world from July. India's insurers do not fall directly under the sanctions regime but depend on the Western reinsurance market to hedge their risk. But an Iranian insurer provided cover for MRPL's crude cargo of about 7 07,500 barrels that arrived at India's Mangalore Port last week, the sources said.

"(MRPL) recently got a cargo insured by an Iranian firm and other cargoes can also be insured from Iran. The company will do that on a case-by-case basis," said one of the sources. The sources declined to be named due to the sensitivity of the subject. Another source said MRPL might continue to get Iranian insurance cover for oil imports from Tehran. "As long as we can avail of Iranian cover we will continue to import cargoes on that basis," the source said.

MRPL is a major Indian buyer of Iranian oil and its insurance policy with New India Assurance Co Ltd for cargoes lapsed this month. State-run insurers were willing to extend cover for crude cargoes except those from Iran under MRPL's new policy, another source said, forcing the refiner to approach Iran. MRPL and other oil firms buy insurance to protect their crude cargo, while ship owners usually arrange cover for the ship and any liability from an oil spill or personal injury.

Indian state-run insurers have agreed to give $50 million cover for local tankers carrying Iranian oil from July, a Shipping Corp of India director said earlier this month. No such facility exists for insuring Iranian oil cargoes. India does not allow state refiners to import oil on a delivered basis, a facility which privately-run Essar Oil has begun using. MRPL is buying oil on a free-on-board (FOB) basis with insurance covered by the Iranian firm.

MRPL has cut to 100,000 bpd its annual crude import deal with Iran for this fiscal year, about 30 percent lower than last year, the first source said, adding the actual off-take could be less. Some units at MRPL's 300,000 bpd refinery in southern India are shut for maintenance, leading to reduced purchases of Iranian oil in May and June, this source said, adding it bought 124,000 bpd from Iran in 2011/12 versus a deal of 142,000 bpd.

By Reuters