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The officials, who didn’t want to be named, said that once the US sanctions on Iranian oil kicked in, India’s future purchases from alternative energy suppliers will be finalised keeping in mind the country’s energy and commercial security.

The US sanctions will disrupt supplies from Iran, which accounted for 10% of India’s energy imports in 2018-19, but the officials said relying on US shale oil will be more expensive and require changes in the configuration of refineries currently set up to process Iranian and other crude.

India is becoming increasingly uncomfortable with the idea of buying more American shale oil, which the US has been pushing to counterbalance the impact of sanctions on Iranian oil exports, officials with direct knowledge of the matter said on condition of anonymity.

India’s main problem with US shale is that it will be more expensive for Indian refineries to process it, effectively increasing the price of the output.

The officials, who didn’t want to be named, said that once the US sanctions on Iranian oil kicked in, India’s future purchases from alternative energy suppliers will be finalised keeping in mind the country’s energy and commercial security.

The US sanctions will disrupt supplies from Iran, which accounted for 10% of India’s energy imports in 2018-19, but the officials said relying on US shale oil will be more expensive and require changes in the configuration of refineries currently set up to process Iranian and other crude.

This, in turn, will make output costlier, and hence, economically unviable, they added.

“We’re already taking a hit due to the disruption of supplies from Iran. It makes no sense if we have to take a bigger hit by sourcing oil that is more expensive from an alternative source,” said an official familiar with developments.

The officials said India is reconsidering a decision to import more shale oil from the US.

Only a handful of new refineries, such as Indian Oil Corporation’s (IOC) Paradip Refinery, can process shale oil as its composition and properties are different from crude oil. The officials said shale oil processing requires refinery recalibration, which is not commercially viable, especially at a time when the country has been hit by the economic impact of the disruption of Iranian crude supplies.

On April 22, US secretary of state Mike Pompeo announced the Trump administration will no longer grant exemptions from sanctions to any country importing Iranian oil. India had been hoping for an extension of the six-month exemption or “Significant Reduction Exceptions (SREs)” that had been granted to it last November.

India imported oil and gas worth close to $4 billion from the US last year, and India’s envoy to Washington, Harsh Shringla, said in January the country is committed to buying American oil and gas worth $5 billion per annum.

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