Privately-owned Essar and four state-run refiners together import about 400,000 barrels per day (bpd) of crude from Iran, India’s second-biggest supplier after Saudi Arabia, in trade worth some $12 billion a year.
The two sides have been trying to find alternative ways to pay since the Reserve Bank of India halted use of the Asian Clearing Union for payments to the sanctions-hit Islamic Republic under U.S. pressure.
“The total outstanding to Iran as on June 30, 2011, was about $2 billion,” Essar’s head of finance, Suresh Jain, said on a conference call for quarterly results.
Essar Oil on Monday reported a net profit of 4.69 billion rupees in June quarter.
Essar itself imports about 3 million barrels from Tehran every month and signed up for extra barrels from Saudi Arabia, India’s biggest oil supplier, in July.
Iran is exporting oil to India, despite receiving no payments, to protect market share from price-cutting competitors such as Saudi Arabia, its OPEC governor Mohammad Ali Khatibi said last week.
Khatibi also said Indian firms have been paying the billions of dollars they owe into a joint bank account controlled by the Indian government, but Essar Chief Executive Naresh Nayyar said he did not know of any such arrangement.
“We have not heard this news. Discussions are on between both the countries, central banks of both the countries to finalise the solution. We believe a resolution is round the corner,” he said.
Essar was confident other supplies were available if the solution to the payments issue lingered on, Nayyar said, but declined to give any deadline for agreement.
“In a worst case scenario, there is sufficient crude available in the market,” he said.
Nayyar said Essar was in talks to buy crudes from Latin America to feed its expanding refining capacity as it plans to upgrade its Vadinar plant to 360,000 bpd from current levels of 280,000 bpd.
The refinery should be operating at the expanded capacity by the first quarter of 2012 and will be capable of processing up to 95 percent heavy and ultra-heavy crudes compared with 66 percent currently.
Nayyar also said his firm’s fuel oil exports would almost halt after expansion of the refinery. He said the refiner currently exports 150,000-300,000 tonnes of fuel oil every month.
(Reporting by Nidhi Verma; Editing by)
