For standalone refinery Chennai Petroleum Corporation Ltd (CPCL), the presence of an Iranian stakeholder is turning out to be an issue in the wake of U.S. sanctions against the West Asian country.
A group company of Indian Oil Corporation, the refinery, after giving up plans to process Iranian crude this year, is now watching the situation as tightening of the sanctions may lead to more, significant repercussions. The 11.5 million-tonne refinery, bulk of whose capacity is in Chennai, was planning to process only 0.5 million tonne Iranian crude. It, however, dropped it after insurers, for the Iranian shipments, said reinsurance companies were reluctant to take up the business.
While such small shortfall could be bridged without difficulty, what could significantly impact CPCL, in which Naftiran Intertrade Company Ltd., an affiliate of National Iranian Oil Company, holds 15.40 per cent stake, is when other countries refrain from supplying crude citing the Iranian interest. “Today, it is only the insurance, and the embargo is on Iranian crude. It can be a major issue if the American government says we will not allow anybody else to sell crude to CPCL. It will definitely be a concern if Arab countries like Kuwait, and Saudi Arabia are not allowed to sell crude,” says CPCL Managing Director A. S. Basu.
He, however, hastened to add that the Centre, which is the biggest shareholder in CPCL through IOC, was seized of the issue. “There can be certain constraints with respect to our business… all these developments [like] the pressure by the insurance companies, higher premium rate, non-processing of Iranian crude,” he says to a query on the bearing because of Iranian partner. He was speaking to The Hindu recently. Though the U.S. sanctions do not stipulate actions such as reduction in the insurance cover corresponding to the Iranian stake in a company, they, nevertheless, were enough for companies to play it safe. CPCL had apprised the government and the Ministry of Petroleum and Natural Gas had taken up with Ministry of Finance and other authorities, but “so far no resolution has come.”