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i-maritime Newsletter

Crude oil from Iran: Ministry studying options to tide over crisis - 2012-02-20

Providing sovereign guarantee in place of insurance cover for Indian ships carrying crude oil from Iran, or allowing import on c.i.f. basis, are among the options being considered to counter the possible impact of the European Union sanction against Iran.

Following the EU sanction announced on January 23, shipping companies said they may not be able to lift Iranian crude with the European P&I clubs likely to withdraw their cover if and when sanctions are implemented.

At a meeting of stakeholders, including representatives of petroleum and other Ministries, convened by the Union Shipping Ministry on Friday, various options were discussed. An official said one of the options discussed was a guarantee by the Indian Government to ships carrying Iranian crude, in the event of European P&I Clubs withdrawing their insurance cover.

Another suggestion was import on c.i.f. basis, which means it would be the responsibility of the Iranian seller of crude to make shipping arrangements. Iran has its own entity providing P&I cover to its ships.

A shipping company official noted that the Islamic Republic of Iran Shipping Line owned by the Iranian government, which operates a large fleet of tankers, could bring crude to India. The problem is this would work out costly for Indian oil companies as they will have to pay higher freight rates.

Meanwhile, a leading private sector Indian ship-owner underplayed the issue, contending the European P&I clubs would not completely withdraw their cover. They could, however, charge a higher premium for carrying Iranian crude, he said. Mr K.M. Sheth, Executive Chairman, Great Eastern Shipping Company, added, “I am willing to send our ships to Iran without any insurance cover, in the event of P&I Clubs cancelling their cover.” Great Eastern is the largest private shipping company in the country, and has an annual contract with MRPL for import of crude from Iran. The P&I Clubs renew their annual insurance contracts on February 20 each year, said Mr Sheth.

So far, there is no indication of non-renewal from their end, he added.

Source: Hindu Business Line