Chennai Petroleum Planning to Buy Iranian Oil After Two-Year Gap

Aug 13, 2014 4:36 am ET

Aug. 13 (Bloomberg) -- Chennai Petroleum Corp., a unit of India’s largest refiner, plans to resume crude imports from Iran after a two-year gap as insurers return to the market.

“This year, we plan to restart Iran oil purchases,” Managing Director S. Venkataramana said in a phone interview. “We are already talking to the re-insurers for this, and we are getting positive responses so far.”

Chennai Petroleum, controlled by Indian Oil Corp., plans to import about 300,000 metric tons of oil from Iran for the year ending in March 2015, he said. Western sanction designed to stop Iran from developing nuclear weapons had hampered the company’s ability to benefit from 90-days credit offered by the Persian Gulf producer, triple what others make available.

“As a result, the working capital requirement of the company has increased, resulting in higher interest expenses,” the refiner said in the annual report on its website.

Iran pledged to continue talks with six other nations after failing to clinch a long-term deal on its nuclear program in Vienna last month. Iran agreed to scale back that program last year and in return was allowed to maintain crude exports at about 1.1 million barrels a day.

Chennai Petroleum operates two refineries in southern India with a combined capacity of 11.5 million tons a year. The bigger of the two refineries at Manali, with capacity to process 10.5 million ton of oil annually, was built 45 years ago to use crude from Iran.

Indian Oil had a 51.9 percent interest in Chennai Petroleum as on June 30, while Naftiran Inter Trade Co., the Swiss-based subsidiary of National Iranian Oil Co., held 15.4 percent, according to the Bombay Stock Exchange website.

“We can buy 1 million tons a year from Iran, but because we will start imports in the latter half of the year, it may be about 0.3 million tons this year,” Venkataramana said. The refiner last imported Iranian oil in the year ended in March 2012.