Iran to accept 45% payment in rupees for oil exports to India: report
 

Mumbai (Platts)--2Feb2012/236 am EST/736 GMT

Iran has agreed to accept 45% of the payment for its oil exports to India in rupees after recent negotiations with Indian officials during their visit to Tehran, the daily Indian Express reported Thursday quoting unnamed sources.

The payments are to be made through one of India's state-owned banks, UCO Bank, the report said. Currently, Iran is being paid around 20% in Indian rupees, into the UCO bank account of Iranian central bank BMJI, as per the understanding the two countries arrived at in October last year, the report said.

India has been having trouble making payments to Iran since December 2010 when the Indian central bank banned payments through Tehran-based Asian Clearing Union.

India has been using Turkey's Halkbank to route payments for the 370,000 b/d of oil it currently buys from Iran since July last year, but this mechanism has also been thrown in doubt after the latest US sanctions.

Iran will receive rupee payments also through two Iranian private banks, Bank Parsian and Karafarin Bank. These banks are still not under sanctions imposed on Iran's state-owned banks, the newspaper report said. Both the banks have applied to the Reserve Bank of India for opening branches in India, it added.

The sources told the paper that the new agreement was part of a "considered option," as a move by state-owned refiner Indian Oil Corp. to open an account with Russia's Gazprombank was not progressing well.

India currently imports approximately $12 billion worth of crude oil from Iran, the country's second large crude source.

Indian oil minister S. Jaipal Reddy last week said India would continue its oil imports from Iran. "In spite of [payment] difficulties, Iran has put up with us. So, it will be our effort in future to tap the Iran source fully because the terms are fairly favorable," Reddy had said.

But oil companies are looking at either marginally reducing term contracts with Iran or tapping additional sources to secure supplies in case of any interruptions in Iran supplies.

State-owned refiner Mangalore Refinery & Petrochemicals Ltd. is the largest buyer of Iranian crude in India. It has a term contract for 7.1 million mt in fiscal 2011-12 (April-March), but until January had only bought 5 million mt. It is looking at possible alternative sources and taking steps to cover any shortages that may arise, company officials said last week.

Another state owned refiner Hindustan Petroleum Corp. Ltd has said it is likely to buy 2.8 million mt of crude oil from Iran through term contracts in fiscal 2012-13, slightly below its 2011-12 term contract of 3 million mt.

The country's largest refiner, IOC is likely to keep its 1.5 million mt/year term contract intact, but with changes in the crude mix from Iran, and a back up supply security, a company official said earlier.

--M.C.Vaijayanthi, newsdesk@platts.com

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