Indian refiners turn to OPEC to make up Iran oil gap

The Oil and Natural Gas Corp. station on the outskirts of Ahmedabad, India. All four Indian state-owned refiners that buy Iranian oil are confident of securing additional barrels from other producers. (Reuters)
Updated 17 April 2019
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Indian refiners turn to OPEC to make up Iran oil gap

  • The state refiners have not yet placed orders for Iranian oil for May, when the current waiver expires, pending clarity from the US
  • All four Indian state-owned refiners that buy Iranian oil are confident of securing additional barrels from other producers

NEW DELHI: Indian refiners are increasing their planned purchases from OPEC nations, Mexico and the US to make up for any loss of Iranian oil if the US enforces sanctions more harshly from next month, sources and company officials said.
All four Indian state-owned refiners that buy Iranian oil are confident of securing additional barrels from other producers, company officials told Reuters.
The state refiners have not yet placed orders for Iranian oil for May, when the current waiver expires, pending clarity from the US.
India’s Bharat Petroleum Corp. (BPCL) and Mangalore Refinery and Petrochemicals (MRPL) have tapped Iraq to make up for Iranian oil, while Indian Oil Corp. (IOC) has signed its first annual contract with US suppliers and raised supplies from Mexico.
“There will be no supply constraints. The supply can come from both OPEC and non-OPEC nations like the US,” said M. K. Surana, chairman of Hindustan Petroleum Corp, which purchased up to 1.5 million tons per year of Iranian crude in 2018/19.
OPEC and other producers including Russia have gradually tightened supply through 2019 to reduce a global glut. OPEC and its partners may not renew the curbs when they expire after June because of the risk of over-tightening the market.
IOC, India’s top refiner and Iran’s biggest Indian client, will cut Iranian oil imports to 6 million tons, or about 120,000 barrels per day, in the 2019/20 period from 9 million in 2018/19, and has raised the optional volumes it can buy from other producers to 2 million tons, a company official said.
“Our optional quantities under term deals are higher than last year. We have optional contracts with Saudi Arabia, Kuwait and other suppliers ... They will supply more if we want,” the official said, adding his firm would also buy more US oil if required.
IOC also hopes to buy 1.5 million tons of Mexican oil in 2019, compared with 1 million tons last year, the source said.
Officials from state-owned National Iranian Oil did not immediately reply to requests for comment on the Indian refiners’ plans to purchase less Iranian crude.
Refinery officials said that their 2019/20 crude import strategy was not contingent on Iranian oil, and was more flexible than in previous years.
“We don’t have a watertight plan for the year, we have optional quantities so that it is possible to find replacement if any country goes out for any reason,” said an MRPL official.
During previous sanctions against Iran, Saudi Arabia and Iraq raised supplies to India to grow market share in the country, the world’s third-biggest oil consumer and importer.
Last year, MRPL signed its first annual deal with Iraq to buy 1.5 million tons of Basra oil in 2019.


US eases restrictions on China’s Huawei to keep networks, phones operating

Updated 21 May 2019
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US eases restrictions on China’s Huawei to keep networks, phones operating

  • The company is still prohibited from buying American parts and components to manufacture new products without license approvals
  • Out of $70 billion Huawei spent buying components in 2018, some $11 billion went to US firms
WASHINGTON: The US government on Monday temporarily eased some trade restrictions imposed last week on China’s Huawei, a move that sought to minimize disruption for the telecom company’s customers around the world.
The US Commerce Department will allow Huawei Technologies Co. Ltd. to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets.
The company is still prohibited from buying American parts and components to manufacture new products without license approvals that likely will be denied.
The US government said it imposed the restrictions because of Huawei’s involvement in activities contrary to national security or foreign policy interests.
The new authorization is intended to give telecommunications operators that rely on Huawei equipment time to make other arrangements, US Secretary of Commerce Wilbur Ross said in a statement.
“In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks,” Ross added.
The license, which is in effect until Aug. 19, suggests changes to Huawei’s supply chain may have immediate, far-reaching and unintended consequences for its customers.
“The goal seems to be to prevent Internet, computer and cell phone systems from crashing,” said Washington lawyer Kevin Wolf, a former Commerce Department official. “This is not a capitulation. This is housekeeping.”
Huawei, the world’s largest telecommunications equipment maker, declined to comment.
The Commerce Department said it will evaluate whether to extend the exemptions beyond 90 days.
On Thursday, the US Commerce Department added Huawei and 68 entities to an export blacklist that makes it nearly impossible for the Chinese company to purchase goods made in the United States.
The government tied Huawei’s addition to the “entity list” to a pending case accusing the company of engaging in bank fraud to obtain embargoed US goods and services in Iran and move money out of the country via the international banking system. Huawei has pleaded not guilty.
Reuters reported Friday that the department was considering a temporary easing, citing a government spokeswoman.
The temporary license also allows disclosures of security vulnerabilities and for Huawei to engage in the development of standards for future 5G networks.
Reuters reported Sunday that Alphabet Inc’s Google suspended business with Huawei that requires the transfer of hardware, software and technical services except those publicly available via open source licensing, citing a source familiar with the matter.
Google did not immediately respond to a request for comment on the new authorization.
Out of $70 billion Huawei spent buying components in 2018, some $11 billion went to US firms including Qualcomm Inc. , Intel Corp. and Micron Technology Inc.
“I think this is a reality check,” said Washington trade lawyer Douglas Jacobson. “It shows how pervasive Huawei goods and technology are around the globe and if the US imposes restrictions, that has impacts.”
Jacobson said the effort to keep existing networks operating appeared aimed at telecom providers in Europe and other countries where Huawei equipment is pervasive.
The move also could assist mobile service providers in thinly populated areas of the United States, such as Wyoming and eastern Oregon, that purchased network equipment from Huawei in recent years.
John Neuffer, the president of the Semiconductor Industry Association, which represents US chipmakers and designers, said in a statement that the association wants the government would ease the restrictions further.
“We hope to work with the administration to broaden the scope of the license,” he said, so that it advances US security goals but does not undermine the industry’s ability to compete globally and remain technology leaders.
A report on Monday on the potential impact of stringent export controls on technologies found that US firms could lose up to $56.3 billion in export sales over five years.
The report, from the Information Technology & Innovation Foundation, said the missed opportunities threatened as many as 74,000 jobs.
Wolf, the former Commerce official, said the Huawei reprieve was similar to action taken by the department in July to prevent systems from crashing after the US banned China’s ZTE Corp, a smaller Huawei rival, from buying American-made components in April.
The US trade ban on ZTE wreaked havoc at wireless carriers in Europe and South Asia, sources told Reuters at the time.
The ban on ZTE was lifted July 13 after the company struck an agreement with the Commerce Department that included a $1 billion fine plus $400 million in escrow and replacement of its board of directors and senior management. ZTE, which had ceased major operations as a result of the ban, then resumed business.
(Reporting by Karen Freifeld in New York and David Shepardson in Washington; Additional reporting by Diane Bartz in Washington and Angela Moon; Editing by Lisa Shumaker and Cynthia Osterman)