India’s Iran oil purchases to fade ahead of US sanctions

India’s Oil Ministry told refiners to prepare for a ‘drastic reduction or zero’ imports from Iran from November. (AFP)
Updated 15 September 2018
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India’s Iran oil purchases to fade ahead of US sanctions

  • India’s loadings from Iran for this month and next will drop to less than 12 million barrels each
  • India’s Oil Ministry in June told refiners to prepare for a drastic reduction or zero imports from Iran from November

NEW DELHI: Indian refiners will cut their monthly crude loadings from Iran for September and October by nearly half from earlier this year as New Delhi works to win waivers on the oil export sanctions Washington plans to reimpose on Tehran in November.
India’s loadings from Iran for this month and next will drop to less than 12 million barrels each, after purchases over April-August had been boosted in anticipation of the reductions.
The US is renewing sanctions on Iran after withdrawing from a 2015 nuclear deal. Washington reimposed some of the financial sanctions from Aug. 6, while those affecting Iran’s petroleum sector will come into force from Nov. 4.
India, Iran’s No.2 oil client behind top buyer China, does not recognize the reimposed US sanctions, but winning a waiver from the restrictions is a must for New Delhi to protect its wider exposure to the US financial system.
India’s Oil Ministry in June told refiners to prepare for a “drastic reduction or zero” imports from Iran from November.
“Some refiners have either already exhausted or front-loaded their term contract to a large extent, which allows them the flexibility to go to zero if required, or until clarity on the waivers emerge,” Amrita Sen, chief oil analyst at Energy Aspect, told Reuters.
Washington will consider waivers for Iranian oil buyers such as India but they must eventually halt crude imports from Tehran, US Secretary of State Mike Pompeo said last week in New Delhi after a meeting of high level officials.
The Indian government, already facing a backlash over a falling rupee and record high fuel prices, does not want to halt the oil imports from Iran as the Islamic republic offers a discount on oil sales to India.
NEW DELHI: Government sources said India made this point clear in last week’s meetings with US officials and remains engaged with Washington to work out waivers on its oil purchases from Iran.
“We have a special relationship with both the US and Iran, and we are seeing how to balance this all, and also to balance out the interest of the refiners and end-consumers,” said one government official.
But if Washington adopts a tough line, India would have no choice but to end imports from Iran, they said.
India lifted about 658,000 barrel of oil per day (bpd) from Iran in April-August, according to data obtained from trade sources by Reuters, and the cuts projected for September and October would drop the daily average over those two months by about 45 percent to 360,000-370,000 bpd.
Indian oil refiners have already given the October loading plans to the National Iranian Oil Co. (NIOC), sources familiar with the loading schedule said.
Top refiner Indian Oil Corp. wants to lift 6 million barrels each in September and October, while Mangalore Refinery and Petrochemicals would load 3 million barrels each for those two months, the sources said.
IOC would also lift 1 million barrels for its subsidiary Chennai Petroleum Corp. in October, they said.
Bharat Petroleum Corp. would lift 1 million barrels in September and skip purchases in October, a company source said on Tuesday.
Bharat Petroleum has already drawn more than its fixed volumes — the amount it is obligated to purchase — that were contracted for 2018/19, its chairman said on Tuesday.
Nayara Energy, part owned by Russian oil giant Rosneft, plans to lift 1 million barrels each in September and October, the sources said. But the refiner began reducing its oil imports from Iran in June and aims to completely halt purchases from November.
Hindustan Petroleum, Reliance Industries and HPCL Mittal Energy (HMEL) have no plans to buy from Iran in September and October, they said.
Indian refiners — excluding Reliance and HMEL, which do not have term contracts with Iran — will together lift about 73 percent of their fixed contract volumes from Iran by end-October, the loading data showed.
IOC, Nayara and MRPL did not respond to requests for comment.


Angola battles to revive oil exploration as output declines

Updated 40 min 33 sec ago
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Angola battles to revive oil exploration as output declines

  • Without another mega-project like Total’s Kaombo on the horizon and fields getting old, Africa’s second-largest crude producer is facing a steep decline
  • Sonangol, the state oil company, is negotiating contracts for new blocks with oil majors and Angola plans to hold an auction next year

LUANDA: On Saturday, nearly two decades after securing the initial rights, Total’s CEO, Patrick Pouyanne, was in Luanda to snip the ribbon on a $16 billion oil project. It is not clear when he, or his peers, will be celebrating in Angola again.

Without another mega-project like Total’s Kaombo on the horizon and fields getting old, Africa’s second-largest crude producer is facing a steep decline unless it can revive exploration in what was once one of the world’s most exciting offshore prospects.
Sonangol, the state oil company, is negotiating contracts for new blocks with oil majors and Angola plans to hold an auction next year, the first tender for exploration rights since 2011.
It is a race against time for a country where oil accounts for 95 percent of exports and around 70 percent of government revenues. Luck will also play a part, as it always does in exploration where finding oil can never be guaranteed.
But without new projects, output could fall to 1 million barrels per day by 2023, according to the oil ministry. That is down from 1.5 million today and nearly half of what Angola was producing a decade ago. The country risks having its OPEC quota cut and is struggling to ensure the long-term feed for its $10 billion liquid natural gas plant.
President Joao Lourenco won an August 2017 election promising an “economic miracle” in Angola, which despite its oil wealth struggles to provide basic services to a mostly impoverished population that is growing at 3 percent a year. But falling oil production means a third consecutive contraction is expected in 2018, even while annual inflation runs at 18 percent.
To turn things around, Angola has asked international oil companies to the table, offering better fiscal terms and more collaboration.
With the time from exploration to first oil on new areas anything from five to 10 years, Angola is also offering tax breaks to encourage companies to link existing marginal discoveries to operating production platforms.
There are signs the measures are working, though some oil experts wonder at what cost for the southwest African country.
“The level of exploration activity in Angola is beginning to change,” Sonangol’s chairman, Carlos Saturnino, said at Saturday’s inauguration.
He expects between five and 10 new concessions to be signed next year.
Exxon, he said, had shown interest in some blocks in southern Angola’s unexplored Namib basin, while advanced discussions are being held with BP, Equinor and ENI for the rights to the ultra-deep offshore blocks 46 and 47.
BP and ENI declined to comment. Equinor and Exxon did not immediately respond to a request for comment.
Total, which operates 40 percent of Angola’s production, plans to drill its first exploration well in four years. Beneath 3,630m of water on block 48, it will be one of the world’s deepest.
“We hope it will be a play-opener for the ultra-deep in Angola,” said Andre Goffart, senior vice president for development. “We are seeing a new wave of exploration in Angola.”
These signs of fresh exploration come after a period of near-paralysis due to a lack of drilling success, a slump in oil prices and a deteriorating relationship between Sonangol and the oil majors.
Angola’s offshore reserves are expensive to explore and develop, making it a hard sell for shareholders when oil is at $40. The number of rigs operating off Angola’s shores dropped from 18 in early 2014 to just two in 2017, according to oil services company Baker Hughes.
The steep drop in prices from 2014 came just as companies were smarting from the failure to discover Brazil-like oil
reservoirs beneath a layer of salt on the African side of the Atlantic. The search for the “Angolan pre-salt” resulted in some of the most expensive dry wells ever drilled and sapped exploration appetite.
Critics say the situation was exacerbated by Isabel dos Santos, the former president’s daughter and previous chair of Sonangol, under whose leadership new projects ground to a halt. Dos Santos denies allegations of mismanagement, saying she helped turn around an almost bankrupt company.
“There are few places in the world right now where the oil majors are in as good a negotiating position as here,” said one international oil executive in Luanda on condition of anonymity.
Some local experts fear the deals Angola is striking are too beneficial for the companies, although details remain private.
“If Angola gives away too much it could create problems further down the line,” said Jose Oliveira, an oil specialist at the Catholic University in Luanda.
But the country has little choice given its imminent production decline and a lack of money or expertise to lead the drilling campaigns itself.