Govt. expects US waiver after Iran oil import cut

Thursday, 17 May 2012 02:26 - - {{hitsCtrl.values.hits}}

Reuters: Sri Lanka expects a U.S. waiver of sanctions on imports of Iranian crude after it took steps to cut them by up to 38 percent, switching to alternatives from Oman and Saudi Arabia, the island's oil minister said on Tuesday.

Susil Premajayantha said Sri Lanka, which is dependent on crude imports, has taken steps to reduce Iranian purchases to eight cargoes per year from 13, buying four cargoes from Oman and one from Saudi Aramco.

Sri Lanka had been dependent on Iran for 93 percent of its crude and had been buying 13 cargoes and one from from Saudi Arabia annually.

"We believe this is a significant reduction of Iranian imports," Premajayantha told Reuters in an interview.

Under a U.S. law signed in December, President Barack Obama is allowed, after June 28, to sanction foreign banks that carry out oil-related transactions with Iran's central bank and effectively cut them off from the U.S. financial system.

Obama can offer exemptions to countries that show they have "significantly" cut their purchases from Iran and has done so in the case of Japan and 10 European Union countries.

"So we are expecting a concession. We have communicated the action plan to them (the United States) and the steps we have taken," he said.

Sri Lanka will receive an annual four Oman cargoes from August and it will buy an additional one from Saudi Aramco to cover May-June crude, he said.

Out of its total $4.63 billion oil import bill last year, Sri Lanka spent around $1.7 billion on purchases of crude, mainly from Iran, amounting to 34 percent. The rest was spent on refined oil products, which came from other sources.

Sri Lanka favoured Iran over other suppliers as Tehran gave an extended four-months credit, allowing it to schedule payments in a way that eased pressure on its rupee currency

sri Lanka's only refinery that process 50,000 barrels per day of crude will be closed for routine maintenance in July and will be opened in August to process Oman crude.

The refinery, at Sapugaskanda, which began operations in 1968, was designed to run on Iranian light grades. It receives 1.89 million tons per year.

Premajayantha last month told Reuters Sri Lanka will refurbish it with a $500 million loan, to process crude from various origins other than Iran.

"The government has to take a policy decision on the refinery refurbishment. Most probably the (state-run) Ceylon Petroleum Corporation will be doing the refurbishment by obtaining a loan. But still we haven't decided on this," he said.

"Once we finalise that only we have to find some alternative supplies when the refinery is closed."Sri Lanka is also considering improving its storage capacity to face any eventuality in future. Jet fuel storage capacity is expected to increase to 50,000 metric tons within two months from the current 20,000 metric tons, the minister said.

"Now we are going to increase our capacity, then we don't need to purchase in emergency," he said.