India In Talks With US Over Strait Of Hormuz Insurance Mechanism

Amid rising tensions triggered by the Israel-US conflict with Iran, India has sought clarity from the United States over a proposed insurance mechanism covering its oil tankers and other vessels traversing through the Strait of Hormuz.

This critical maritime waterway lying between Oman and Iran is considered a vital for global shipping activities, especially pertaining to oil and gas supplies to Asian nations, such as Pakistan, China, and India.

Earlier this week, US President Doanld Trump noted that US International Development Finance Corporation would offer cover to help maintain the flow of energy and other trade in the Gulf.

Meanwhile, the global oil prices have surged since the US and Israel on October 28 launched a coordinated attack on Iran, causing disruptions in maritime trade activities.

The Strait of Hormuz is credited for almost 20% of the world's oil supply flows, nearly 17 million barrels every day. Tanker transits in the Strait of Hormuz are 90% lower as compared to last week, according to energy intelligence firm Kpler.  

Also Read: Strait of Hormuz Crisis: Pakistan Mulls Over Petroleum Price Revision

Currently, shipping companies are reluctant to send vessels into a conflict zone, particularly as insurance premiums have surged sharply.

India faces supply chain disruption risks as nearly 40% of its crude imports pass via the narrow Persian Gulf route.

Recently, the Mangalore Refinery and Petrochemicals Ltd., a unit of state-run Oil and Natural Gas Corp., has closed a crude distillation unit due to shortages.

Despite the setback, crude and refined product inventories remain comfortable and there is no need to halt fuel exports as of now, the official said.

The impact is also being felt in the gas market. Liquefied natural gas supplies have been disrupted after QatarEnergy halted operations at its Ras Laffan facility, which is considered the world’s biggest LNG export plant.
 
In a move to minimize the gap, the fourth-largest LNG importer is seeking volumes of the supercooled fuel from alternative sources, the official said. It will also reprioritize sales of locally produced gas to industrial consumers, the official said, citing a Bloomberg report.

As per the existing policy, households, automobiles, and the fertilizer industry get priority allocations of locally produced gas.