'Oil supply not hurt by payments issue'

Essar Oil, the nation's second biggest importer of Iranian crude oil, said supplies from the Persian Gulf country have not been affected after the RBI clamped down on the main conduit Indian companies use to pay for the consignments.

"We have been importing 3 million barrels of crude oil per month from Iran. There is no change in that status... there has been no disruption in supplies... We continue to import same volumes (this month)," Essar Oil Managing Director and CEO Naresh Nayyar said.

Iran is selling crude oil to Indian refiners on open credit after the Reserve Bank of India closed the Asian Clearing Union (ACU) route, a move that effectively bars settlement in US dollars and the euro. "We hope there will be resolution soon," he said.

Iran has agreed to sell crude oil on credit this month, pending resolution of the deadlock. Mangalore Refinery and Petrochemicals Ltd, the nation's largest importer of Iranian crude oil, and state refiners Indian Oil Corp and Hindustan Petroleum Corp will get some 6 million barrels of crude on 60 to 90 days' credit. India has asked Iran to identify a panel of banks, which are not under US sanctions, to route payments to National Iranian Oil Co (NIOC).

State Bank of India, the nation's largest lender, is ready to facilitate payments, but is not willing to deal with any bank on the US sanctions list.

The two nations have so far not been able to find a solution on how New Delhi should pay for oil imports from Iran after India's central bank said on December 23 that payments to Iran can no longer be settled using a long-standing clearing house system run by regional central banks.

Further, riding on back of high refining margins, Essar Oil reported a net profit of Rs 273 crore in the quarter ended December 31, 2010 as against a loss of Rs 266 crore in a year ago period.

The company earned $7.21 on refining every barrel of crude oil in October-December quarter as against a gross refining margin (GRM) of $ 1.56 per barrel in the year ago period, Essar said in a statement.

"This (strong financial and operating performance) has been driven by increased refinery throughout and a recovery in global oil demand, which has led to an improvement in refining margins," Essar Oil Managing Director Naresh Nayyar said.

The company's Vadinar refinery in Gujarat processed 3.73 million tonnes of crude oil in the quarter as against 3.51 million tonnes in the third quarter of previous fiscal. The 14 million tonnes a year refinery is being expanded to 18 million tonnes by June this year.

Essar also plans to raise refinery capacity by two million tonnes by September 2012.

"Augmenting refining capacity by an additional two million tonnes per year will help Essar Oil capture the growing domestic demand for petro products at a very competitive capital cost of Rs 1,700 crore (Rs 17 billion), resulting in very strong economic performance for the refinery," according to the statement issued by the company.

Revenues increased 21 per cent to Rs 13,809 crore in October-December from Rs 11,420 crore (Rs 11.42 billion). During April-December, the company reported a net profit of Rs 333 crore (Rs 3.33 billion) as opposed to a loss of Rs 150 crore (Rs 1.5 billion) in the first nine months of previous fiscal.

Essar earned a gross refining margin of $ 6.5 per barrel in the first nine months of current fiscal as against a GRM of $ 3.1 per barrel in the year ago period. Sales increased to Rs 38,273 crore (Rs 382.73 billion) from Rs 30,460 crore (Rs 304.6 billion) in April-December of 2009.