Iraq offers longer credit to Indian oil buyers

It is willing to double the credit period on crude sales to 60 days if Indian refiners buy more in 2014

Iraq is willing to double the credit period on crude sales to 60 days if Indian refiners buy more in 2014, the head of refineries at Hindustan Petroleum said on Monday.

Iran has also sweetened the deal to expand its dwindling market share by offering free shipment and a nominal discount to Indian refiners, sources said last week.

Iraq along with Saudi Arabia stepped up sales to India after western sanctions shut payment avenues and made trade with Tehran difficult.

"Iraq is very positive. They are willing to raise credit period to 60 days and waive off opening of letters of credit (LCs) provided volumes are increased," B.K. Namdeo told Reuters.

He said HPCL has not yet worked out crude import numbers for 2014.

Middle East oil producers are also offering better terms to grab a bigger slice of the Asian market as the U.S. shale oil boom has changed the global energy landscape with Washington ceding its ranking as top oil importer to China.

Kuwait will also decide in the next three months on raising 90 days credit on crude sales to India from the current 60 days, its oil minister Mustapha al-Shamali said on Saturday.

"Our credibility is good, we have never defaulted. Waiver of opening of LCs will save as bank charges that we unnecessarily pay," said HPCL's Namdeo.

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

India's biggest refiner, Indian Oil Corp could also raise imports from Iraq to 284,000 bpd in 2014 from 270,000 bpd now as it aims to commission its 300,000 bpd Paradip refinery on the east coast next year, a company source said.

Iraq displaced Iran as second biggest oil seller to India in 2011/12. In the last fiscal year that ended in March Iraq supplied about 13 percent of India's overall oil imports, according to the preliminary government data.

India, the world's fourth-biggest oil importer and Iran's second-biggest client, relies on outside supplies for 80 percent of its oil needs, or about 3.7 million barrels per day (bpd).

HPCL operates a 130,000 bpd plant in western Maharashtra state. It also has a stake in the 180,000 bpd Bhatinda refinery in northern India, which is operated by Hindustan-Mittal Energy Ltd, part-owned by LN Mittal.)