Iraq, Iran offer extended credit period for Indian crude imports

Iraq has offered to double the credit period on crude sales to 60 days if Indian refiners bought more in 2014, reports quoting the head of refineries at Hindustan Petroleum Corporation Ltd (HPCL) said on Monday.

The report quoting B K Namdeo, chairman of HPCL, said Iraq was willing to increase credit period to 60 days and also waive off opening letters of credit (LCs) provided volumes were increased.

In a sweetening of the deal aimed at expanding its dwindling market share, neighbouring Iran had also offered free shipment plus a nominal discount to Indian refineries, according to reports.

Iraq and Saudi Arabia had increased sales to India after western sanctions shut payment avenues making it difficult to trade with Tehran.

HPCL, however, is to yet work out crude import numbers for 2014.

Middle East oil producers were offering better terms to get a bigger slice of Asian market, with the US shale oil boom changing the global energy landscape and China displacing US as the top oil importer.

Kuwait is also considering a similar step in the next three months on raising 90 days credit on crude sales to India from the current 60 days, according to oil minister Mustapha al-Shamali.

Namdeo said India's credibility was good and India had never defaulted. He added, waiver of opening of LCs would save bank charges that were being paid unnecessarily.

HPCL has a deal to buy 60,000 barrels per day of Basrah oil from Iraq's State Oil Marketing Organisation (SOMO) and also a contract to buy another 40,000 bpd from Total.

India's biggest refiner, Indian Oil Corp could also step up imports from Iraq to 284,000 bpd in 2014 from 270,000 bpd at present as it aimed to commission its 300,000 bpd Paradip refinery on the east coast next year, Reuters quoted a company source as saying.

Iraq became the second biggest oil seller to India in 2011-12 with supplies of around 13 per cent of India's overall oil imports, according to preliminary government data in the last fiscal year ended March.

India, the fourth-biggest oil importer in the world and Iran's second-biggest client, relied on outside supplies for 80 per cent of its oil needs, which amounted to 3.7 million barrels per day (bpd).