* Officials see problem insuring refineries using Iran's oil
* Aims at a 33 pct jump in Iraq oil imports in 2013/14
* HPCL's insurance policy due in June
By Nidhi Verma
NEW DELHI, Feb 12 (Reuters) - India's Hindustan Petroleum Corp may have to halt Iranian oil imports from June because western sanctions could mean its refineries cannot renew insurance to process the crude, officials said on Tuesday.
It plans to lift more crude from Iraq to make up for the loss of Iranian barrels in the contract year which starts on April 1, 2013.
European Union and U.S. sanctions aimed at forcing Iran to curb its nuclear programme, which the West believes is aimed at making a bomb, have more than halved Iran's oil exports in 2012. Iran says its nuclear programme is for civilian use.
Any cut in HPCL's Iran oil imports would be in line with a broader goal set by India, the world's fourth-largest oil importer and Iran's second-biggest client after China, to reduce deliveries from Tehran. A tough new U.S. condition on funding such purchases has been imposed.
State-run HPCL will lift up to 46,000 barrels per day (bpd) from Iran in the year ending March 31, HPCL's head of refineries K. Murali said, under a contract for 40,000 bpd with an option for another 20,000 bpd.
Murali said HPCL would take up to three cargoes totalling three million barrels from Tehran during April and May.
HPCL, Iran's third-biggest Indian oil client, may not be able to get insurers to renew cover if it processes Iranian oil in its two refineries when renewal comes up in June.
Indian insurers do not fall directly under the sanctions but depend on the Western reinsurance market to hedge their risk.
"It is not only an economic valuation. There are other factors also, like insurance, and once we get clarity then we will be able to decide whether we will be able to take Iranian crude or not," said Murali.
Indian insurers have told fellow state-run refiner MRPL that they will only fully cover its facility to handle larger crude vessels if it gives an undertaking not to use the single point mooring for vessels carrying Iranian crude.
HPCL aims to have a contract to import only token volumes from Iran in the year that starts in April, because of the growing concerns about insurance, a source privy to HPCL's crude import plan had told Reuters earlier in the day.
"Volumes from Iran depend on the impact of sanctions. If sanctions are eased or if the government helps on the insurance issue, then Iran imports may go up. But at this moment no one wants to take the risk," this source, who is not authorised to speak to the media, said.
To make up for a cut in Iranian oil purchases, HPCL wants to increase its annual deal with Iraq's State Oil Marketing Organisation (SOMO) to about 60,000 bpd in the year starting in April from 45,000 bpd in the current year, the source added.
HPCL may buy some Iraqi Basrah crude volumes through stakeholders other than SOMO, the source added.
ALTERNATIVE SUPPLY SOURCES
Indian refiners have been compensating for lost Iranian volumes with crude from Iraq and Latin America. Iraq replaced Iran as the country's No. 2 supplier after Saudi Arabia in the year that ended in March 2012, as Tehran ceded a position it had held for five years.
Sanctions on Tehran have also prompted its other major Asian clients - China, Japan and South Korea - to cut imports and secure a waiver which allows them continued access to the U.S. financial system.
Refiners are already finding it difficult to import because of an EU ban on insuring vessels carrying Iranian oil. Moreover, under new U.S. sanctions from Feb. 6, payments for Iranian crude must be held in a bank account in India in rupees, which are not freely traded on international markets.
India is aiming to cut deliveries from Tehran by 10-15 percent in the year beginning in April after reductions of about 15 percent in the current year.
Indian refiners, both private and state-run, have already cut imports by about 19 percent in April-December 2012 to around 270,700 bpd.
HPCL operates the 166,000 bpd Vizag refinery in southern India and a 130,000 bpd plant in western Maharashtra state.