Not all of Iran’s oil buyers are likely to get the waivers, said the source, who declined to elaborate. Around two thirds of Iran’s crude exports flow to Asia, where the biggest buyers are China, Japan, India and South Korea.

The United States granted Japan an exception in March and has signaled it has had good talks with South Korea about reducing oil purchases. Refiners in South Korea will switch to other sources on July 1, industry sources have said.

But the U.S. may withhold waivers for China and Singapore, according to an advocate of tougher sanctions on Iran, stepping up pressure on Iran’s biggest crude oil buyer and a major destination for its fuel oil exports.

Mark Dubowitz, the advocate and head of the Foundation for Defense of Democracies, said he expected all of Iran’s other oil buyers would eventually get the exceptions.

He believes China has received some clandestine cargoes from Iran. Tehran has withheld the destination of some oil shipments by disabling tracking systems on its tanker fleet, according to shipping and trading sources.

The United States would be better off delaying a decision on China, he said, than to grant an exception now and be forced not to renew it later when more evidence of the shipments could come to light.

Singapore is not a big consumer of oil, but it is a major blender of fuel, including some from Iran.

The latest round of U.S. sanctions come into effect on June 28 and aim to cut Iran’s oil revenue to pressure Tehran into halting its nuclear program. Western powers suspect Iran is aiming to develop nuclear arms, but Tehran says the program is for civilian purposes only.

Under the law President Barack Obama signed late last year, the administration can exempt countries from sanctions if they make significant reductions to crude imports from Iran. Secretary of State Hillary Clinton granted waivers in March to 10 European Union countries, in addition to Japan.

Another U.S. official, who also asked not to be identified, said earlier on Thursday more exceptions would be announced “soon.”

Even if countries are omitted from the list, it does not necessarily follow that the United States would quickly impose sanctions after June 28, the official said.

It would take some time for the U.S. to gather evidence to support punitive measures against financial institutions that have processed oil transactions, said the official.

China, Japan, India and South Korea have already cut their imports by about a fifth from the 1.45 million barrels per day they were buying a year ago as they prepare for the U.S. sanctions to come into effect.

Iran’s Asian importers are also struggling to find ways around European Union sanctions that prevent EU insurers from covering shipments of Iranian crude.

Europe dominates the world’s tanker insurance market and without its insurers, Iran’s crude buyers in Asia may be forced into more drastic import cuts.

Washington has encouraged oil producers, including ally and top exporter Saudi Arabia, to pump more supplies to ensure there is enough crude in the market to cushion the impact of the sanctions.

Plentiful supply and faltering global growth have pushed international Brent crude prices down to around $100 a barrel, from a March peak of $128, making it less costly for buyers to find alternatives.

(Editing by Ed Lane, Anthony Barker, Sofina Mirza-Reid and Jim Marshall)

The latest round of U.S. sanctions come into effect on June 28 and aim to cut Iran’s oil revenue to pressure Tehran into halting its nuclear program. Western powers suspect Iran is aiming to develop nuclear arms, but Tehran says the program is for civilian purposes.

The United States can exempt countries from sanctions if they make significant reductions to crude imports from Iran, and has already granted waivers to Japan and 10 European Union countries in March.

The official, who asked not to be identified, said the announcement was originally going to be made in late May but has been delayed and will not be out this week.

Another U.S. official, who also asked not to be identified, said earlier on Thursday more exceptions would be announced “soon” but declined to give more details on which countries would join the exemptions list. The official said the United States and South Korea had made progress in talks about reducing imports from Iran.

Even if countries are omitted from the list, it does not necessarily follow that the United States would quickly impose sanctions after June 28, the official said.

It would take some time for the U.S. to gather evidence to support punitive measures against financial institutions that have processed oil transactions, said the official who had spoken earlier.

Around two thirds of Iran’s crude exports flow to Asia, where the biggest buyers are China, Japan, India and South Korea.

The four countries have already cut their imports by about a fifth from the 1.45 million barrels per day (bpd) they were buying a year ago as they prepare for the U.S. sanctions to come into effect.

ALL BUT CHINA?

Mark Dubowitz, the head of the Foundation for Defense of Democracies which is an advocate for tougher sanctions on Iran, said he expected all of Iran’s major buyers, but China would get the exceptions.

He believes China has received some clandestine cargoes from Iran. Tehran has covered the destination of some oil sales by disabling tracking systems on its tanker fleet, according to shipping and trading sources.

The United States would be better off delaying a decision on China, he said, than to grant an exception now and be forced to revoke it later when more evidence of the shipments could come to light.

Iran’s Asian importers are also struggling to find ways around European Union sanctions that prevent EU insurers from covering shipments of Iranian crude.

Europe dominates the world’s tanker insurance market and without its insurers, Iran’s crude buyers in Asia may be forced into more drastic import cuts.

Washington has encouraged oil producers, including ally and top exporter Saudi Arabia, to pump more supplies to ensure there is enough crude in the market to cushion the impact of the sanctions.

Plentiful supply and faltering global growth have pushed international Brent crude prices down to around $100 a barrel, from a March peak of $128, making it less costly for buyers to find alternatives.

(Editing by Ed Lane, Anthony Barker and Sofina Mirza-Reid)

The latest round of U.S. sanctions come into effect on June 28 and aim to cut Iran’s oil revenue to pressure Tehran into halting its nuclear program, which Western powers suspect is aimed at developing arms.

The United States can exempt countries from sanctions if they make significant reductions to crude imports from Iran, and granted a waiver to Japan and 10 European countries in March.

The official, who is familiar with the talks on sanctions and asked not to be identified, declined to give more details on which countries would join the exemptions list, but said the United States and South Korea had made progress in talks.

Even if countries are omitted from the list, it does not necessarily follow that the United States would quickly impose sanctions after June 28, the official said.

It would take some time for the U.S. to gather evidence to support punitive measures against financial institutions that have processed oil transactions, the official added.

Around two thirds of Iran’s crude exports flow to Asia, where the biggest buyers are China, Japan, India and South Korea.

The four countries have already cut their imports by about a fifth from the 1.45 million barrels per day (bpd) they were buying a year ago as they prepare for the U.S. sanctions to come into effect.

Iran’s Asian importers are also struggling to find ways around European Union sanctions that prevent EU insurers from covering shipments of Iranian crude.

Europe’s dominates the world’s tanker insurance market and without its insurers, Iran’s crude buyers in Asia may be forced into more drastic import cuts.

Washington has encouraged oil producers, including ally and top exporter Saudi Arabia, to pump more to ensure there is enough crude in the market to cushion the impact of the sanctions.

Plentiful supply and faltering global growth have pushed international Brent crude prices down to around $100 a barrel from a March peak of $128, making it less costly for buyers to find alternatives.

(Editing by Ed Lane and Anthony Barker)

Brent crude this week dropped to a 16-month low
below $96 a barrel before recovering to around $99, well off a
peak of more than $128 in March but not low enough to stimulate,
rather than hinder growth, Maria van der Hoeven said.

“Let’s be honest, we still confront a situation of near
triple digit oil prices,” Van der Hoeven told reporters at a
news conference in the Malaysian capital.

“This is placing a huge burden on budgets and that’s
contributing to the risk of further economic slowdown.”

Increased supply from OPEC producers had helped ease the
price, she said. The fall was important, she said, but producers
and consumers could not yet claim victory in taming the oil
price.

“I do hope the price will come down,” she told Reuters on
the sidelines of an industry conference. “The market is well
supplied, producers are supplying more than demand.”

OPEC output in May hit its highest levels since 2008, as
Saudi Arabia kept production high despite the fall in prices.

Top oil producer Saudi Arabia pumped an extra 100,000 bpd in
May, a Reuters survey of OPEC output found, taking output to
10.10 million bpd, the highest in decades.

Saudi Arabia has said it is targeting an oil price around
$100 a barrel, but is unlikely to throttle back on output just
yet.

More comfortable inventory levels in consuming countries
were enough to offset any concerns that rising Saudi output left
less spare capacity in global oil production to meet any
surprise supply outages, Van der Hoeven said.

“Of course it’s a trade-off between spare capacity and more
comfortable consumer stocks,” she told Reuters. “Producers have
clearly made every effort to ensure there is sufficient supply
to the market.”

A slowdown in economic activity in China, India and Europe
could lead to global growth in fuel consumption coming in a lot
weaker than the 800,000 barrels per day that the IEA has
forecast for 2012, Van der Hoeven said.

“Oil demand growth could be markedly weaker than our base
case assumption,” she said, declining to give a new estimate of
global demand growth for the year ahead of the release of the
IEA’s monthly oil market report next week.

IRAN, INVENTORIES

It was too soon to say if there was enough oil on the market
to meet the disruption to Iranian exports caused by U.S. and
European Union sanctions, she said.

The sanctions aim to cut Iran’s oil income and force the
country to halt its nuclear programme, which the West suspects
is aimed at developing weapons.

The IEA was ready to coordinate a release of oil from
strategic stocks, she said, if a serious disruption in supplies
made it necessary.

Leaders of the Group of Eight major economies raised the
pressure on Iran last month by signalling their readiness to tap
into emergency oil stockpiles quickly this summer if tougher new
sanctions on Tehran threaten to strain supplies.

The G8 put the IEA — the West’s energy adviser responsible
for coordinating reserves — on standby for action in the
clearest sign yet that U.S. President Barack Obama is winning
support for tapping government-held oil stocks for the second
time in two years.

(Reporting by Simon Webb; Editing by Ed Davies)

Australia is on its way to becoming the world’s largest
liquefied natural gas (LNG) exporter, with around $170 billion
in projects under construction. Total already has minority
stakes in two of those projects, and is looking to expand,
Christophe de Margerie said.

“There are opportunities around unconventional gas and oil,”
he told reporters on the sidelines of an industry event in
Australia.

“We are interested in the opportunities to develop our own
activity, I mean by operating.”

Total owns a 24 percent stake in the Ichthys LNG project. It
has agreed to raise that stake to 30 percent, and the deal
should get final agreement within a few weeks, he said. Total
also owns 27.5 percent of the Gladstone LNG project.

De Margerie will meet Australia Prime Minister Julia Gillard
on Tuesday and would discuss the possibility of Total taking a
bigger role in Australia’s oil and gas sector then, he said.

Labour costs in Australia were high but not enough to
dissuade Total from investing in more projects, de Margerie
said.

The most recent cost estimate for the Ichthys project is $34
billion, from an original estimate of $20 billion made in 2008.
Simultaneous work on a swathe of energy and mining projects has
driven up costs across the country.

Still, Australia’s access to fast-growing Asian energy
markets and its operating environment made it a good target for
investment, de Margerie said.

Projects in Australia helped balance Total’s portfolio, he
added, which was otherwise skewed toward investment in
developing countries.

Recent weak Chinese economic data had led to no pull back
for Total in projects focused on Asia’s energy market, de
Margerie said.

“We are a long-term industry. We don’t do things based on
one-day this, one-day that,” he said. “We know that in the long
term Asia will need a lot of additional oil and gas to cover
demand. China and others in the region will still need more
energy.”

IRAN

There was enough oil supply in the market to absorb the
impact of international sanctions on Iran, de Margerie said. He
declined to estimate how much European and U.S. sanctions would
impact Iran’s around 2.2 million barrels per day of exports, but
said oil markets had already priced in disruption.

“The market doesn’t believe it will have that much impact
otherwise the price of oil would have climbed to a higher
level,” he said. “So you have the answer in the market.”

Total was the second-largest buyer of Iranian oil among the
European Union and Turkey in 2011, according to industry and
Reuters estimates, but bought no Iranian oil in March and April.

ELGIN LEAK, ANGOLA LNG

Total would end a gas leak at its North Sea Elgin field in
the coming days, de Margerie said. The company was waiting
simply for good enough weather to kill the well, he added.

The well is leaking around 50,000 cubic metres a day of gas,
down from 200,000 cubic metres a day when the leak first started
in March.

The Angola LNG project would start production in June, de
Margerie said. The LNG would go into the spot market, he added.

Gas from the Angola project was initially destined for the
U.S. market, but the rise in domestic shale gas supply there has
stunted demand for imported LNG.

“The shareholders in the project are using their trading
strength to find the best outlets for the gas,” he said.

Total has a 13.6 percent stake in the 5.2 million tonnes per
annum Angola LNG project. Chevron owns 36.4 percent and
Angolan state oil giant Sonangol has 22.8 percent. Italy’s ENI
and BP also hold stakes.

(Editing by Ed Davies)

International Brent crude settled at $112.26 on Friday, well off a peak of over $128 in March. Brent has mostly traded above $100 since early 2011, keeping fuel costs high and threatening to damage a fragile global economy.

“We want a price around $100, that’s what we want,” Naimi told reporters ahead of an industry event in Australia. “A $100 price is great.”

Saudi Arabia is working at bringing Brent crude prices to that level, he added. The kingdom, OPEC’s biggest producer, said it pumped 10.1 million bpd in April, its highest for more than 30 years, as it bid to meet growing demand and curb oil prices.

Prices have stayed high in 2012 due to concern about disruption to global supply from U.S. and European sanctions aimed at hurting Iran’s crude export revenues and forcing Tehran to halt its nuclear program. The U.S. and its allies suspect Iran is developing nuclear weapons, which Tehran denies.

Naimi said last week that producers were pumping enough to deal with the impact of the sanctions on the oil market. [ID:nL4E8G96HJ] He reiterated on Sunday that producers were pumping 1.3 million barrels per day (bpd) to 1.5 million bpd above demand, which is helping to build inventory.

“That should give comfort to consumers,” he said.

Inventories are at the equivalent of around 58 days of demand, but Saudi Arabia would like to see stockpiles build more ready for the seasonal increase in fuel consumption in the second half of the year, Naimi said.

“It should be a little bit higher, because you are going into the third and fourth quarter, and demand will be higher as usual,” he said.

The International Energy Agency said on Friday that oil prices were likely to stay high, despite a dramatic improvement in world supply and a big build in stocks, due to the tensions between Iran and the West.

(Reporting by Rebekah Kebede; Writing by Simon Webb; Editing by Jeremy Laurence)

The exports, while lower than the 3 million tonnes of the 2011-12 season to end-September, would mark the third consecutive year that India has produced more sugar than it has consumed.

India, the world’s second-biggest sugar producer, can have a significant impact on world prices. It last imported sugar after the worst drought in nearly four decades in 2009-10, driving global raw sugar futures to a 30-year peak.

The current drought has come during cane planting and will affect yields, bringing down output in the world’s second-largest producer in 2012-13 to 24.5 million to 25 million tonnes, Rahil Shaikh, managing director of ED&F Man Commodities India, told Reuters in an interview on Friday.

That compares with his 2011-12 estimate of 26 million tonnes.

“I think India will continue exports (in 2012-13), provided the monsoon remains normal,” he said.

India’s agricultural output heavily depends on the monsoon rains, which fall across the country from June to September. The Indian government on Thursday forecast monsoon rainfall in the coming season should be within average.

RAW SUGAR PREFERRED

Indian sugar mills are likely to continue producing raw sugar for export for the next season if they are confident that exports will continue, Shaikh said.

Most overseas buyers prefer raw sugar to the low quality of refined sugar that comes out of Indian mills, he added. Indian millers are geared mostly to produce white sugar for domestic consumption and rarely produce raws.

“It is easier for Indian millers to sell raws on the international market,” said Rahil, who has been trading Indian sugar for nearly two decades and forecast in July 2011 that India would export 3 million tonnes in the 2011-12 year.

“There are many buyers for raws … It is difficult to sell lower quality Indian whites quickly.”

India sugar millers are likely to produce around 1.2 million tonnes of raw sugar for export in the 2011-12 year ending in September, up from just 200,000 tonnes on the previous year, encouraged by the government’s export policy, he said.

India has exported around 1.55 million tonnes of the sweetener out of the 2 million tonnes the government has already licensed in the 2011-12 season, he added. That included 520,000 tonnes of raw sugar, he said.

The government agreed to allow exports of another 1 million tonnes in March, giving a total for the season of 3 million tonnes, but has yet to finalise those shipments.

The delay in agreeing on shipments has hurt India’s millers as international prices for the sweetener have fallen, he said. They may struggle to sell the full volume, he added.

“Prices are higher in the local market than the international market, he said. “But still some mills will export depending on their (cash) requirements.”

Sugar sales in the local market are regulated by the federal government. Every month the government allocates a quota for each mill for sales in the open market. Some Indian millers are ready to sell sugar at a lower price in the world market as they need the cash to pay arrears owed to farmers for cane.

The country is likely to have sugar stocks of 5 million tonnes when the 2012-13 season starts in October, unchanged from the current year, he said.

(Editing by Jo Winterbottom and Jane Baird)

Essar has just completed a $1.6 billion overhaul and expansion at the Vadinar refinery, raising capacity to around 360,000 barrels per day from 280,000 bpd and adding units that can process cheaper, heavier crude into fuels.

The refinery would reach 400,000 bpd capacity in September, Managing Director Lalit Kumar Gupta said.

“The difference in our margins and those in our neighbouring refinery, which is as complex as we are today, has been about $3 to $4/bbl. We should be able to bridge that gap now,” Gupta told Reuters in an interview.

The refinery would gain another $1 a barrel in margins through using a coal-fired power plant to provide electricity, which would save on fuel costs, Gupta said.

Essar had earlier forecast a 35 percent jump in revenues for the fiscal year that started on April 1. Revenues for the previous fiscal year were around $9.5 billion.

Essar plans to sell a stake of around 15 percent by June 2013, as required by the Securities and Exchange Board of India (SEBI) to reduce the stake held by founding shareholders to 75 percent from nearly 90 percent now.

The company believes its shares are trading below value and the price will improve after investors see it operate the newly expanded refinery for two quarters, Gupta said.

That would be a better time for any stake sale, he added. Given the full expansion will be completed in September, that would push any possible stake-sell to close to the deadline.

“We will come to market when we are rightly priced. At the current price we think we are heavily undervalued. We see significant upside in our refinery business,” Gupta said.

Essar Oil’s market valuation stands at $1.3 billion and its shares have barely changed so far in 2012, closing on Thursday at 50 rupees a share, a fraction of the peak in 2008 of nearly 356 rupees.

Essar, 87 percent owned by London-listed Essar Energy (ESSR.L: Quote, Profile, Research), is one of only two private refiners in India.

The other is Reliance Industries (RELI.NS: Quote, Profile, Research), which operates the world’s biggest refining complex at Jamnagar and has among the best margins in the industry.

Reliance reported gross refining margins of $7.60 a barrel for the March quarter, down from $9.20 a year ago.

MARGINS

Gupta said he expected refinery margins to rise in coming quarters as the northern hemisphere summer driving season demand kicked in and improved profits for making gasoline.

“Going forward, once the gasoline cracks are better, margins can only go up,” he said. “Definitely complex refineries have to make more margins.”

The company is currently negotiating with the government in Gujarat more time to repay a $1.24 billion sales tax due after the Supreme Court dismissed Essar’s petition seeking a review of an earlier verdict to defer payment.

Essar, which has already booked a 40 billion rupees loss in its books for the tax liability, hopes to service repayments from the increased cashflows of its expanded refinery, but is also in talks with several banks to raise funds for the payment, Gupta said, but declined to name the banks.

“If the Gujarat government insists on some interest, to that extent our earnings will definitely get impacted. But going forward, we see strong cash flows and earnings, so we are not unduly worried,” Gupta said.

Essar will be able to use heavy crude for almost 80 percent of its capacity and is gradually shifting to Latin American oil from Venezuela, Colombia, Mexico and Brazil.

“Middle East crude slowly will get reduced in our basket. If they are not low API, if they are costlier, we will reduce. Ultimately, it’s a question of optimising margins,” Gupta said.

Essar is also reducing dependence on oil from Iran, its single largest supplier, in line with plans by other Indian refiners as international sanctions target the flow of Iran’s exports. The U.S. and its allies aim to reduce Iran’s oil revenues to pressure Tehran not to build nuclear weapons.

Essar had renewed a contract with Iran in January for 100,000 bpd, Gupta said, the same volume as last year.

Iranian crude would account for around 25 percent of Essar’s supplies when the expansion was completed, down from around 40 percent, he added.

Industry sources have told Reuters Essar plans to cut 15 percent from its 100,0000 bpd contract, which runs from April 2012 for a year. Gupta declined to comment.

Earlier this month, data published by a leading industry consultant showed India has vaulted to the top of the list of Iran’s oil customers, overtaking China, in a first-quarter buying surge ahead of tighter sanctions against Tehran this summer.

India’s Iranian crude imports could fall around 25 percent from April, when new annual contracts take effect.

(Editing by James Jukwey)

Essar has just completed a $1.6 billion overhaul and
expansion at the Vadinar refinery, raising capacity to around
360,000 barrels per day from 280,000 bpd and adding units that
can process cheaper, heavier crude into fuels.

The refinery would reach 400,000 bpd capacity in September,
Managing Director Lalit Kumar Gupta said.

“The difference in our margins and those in our neighbouring
refinery, which is as complex as we are today, has been about $3
to $4/bbl. We should be able to bridge that gap now,” Gupta told
Reuters in an interview.

The refinery would gain another $1 a barrel in margins
through using a coal-fired power plant to provide electricity,
which would save on fuel costs, Gupta said.

Essar had earlier forecast a 35 percent jump in revenues for
the fiscal year that started on April 1. Revenues for the
previous fiscal year were around $9.5 billion.

Essar plans to sell a stake of around 15 percent by June
2013, as required by India’s market regulator to reduce the
stake held by founding shareholders to 75 percent from nearly 90
percent now.

The company believes its shares are trading below value and
the price will improve after investors see it operate the newly
expanded refinery for two quarters, Gupta said.

That would be a better time for any stake sale, he added.
Given the full expansion will be completed in September, that
would push any possible stake-sell to close to the deadline.

“We will come to market when we are rightly priced. At the
current price we think we are heavily undervalued. We see
significant upside in our refinery business,” Gupta said.

Essar Oil’s market valuation stands at $1.3 billion and its
shares have barely changed so far in 2012, closing on Thursday
at 50 rupees a share, a fraction of the peak in 2008 of nearly
356 rupees.

Essar, 87 percent owned by London-listed Essar Energy
, is one of only two private refiners in India.

The other is Reliance Industries, which operates
the world’s biggest refining complex at Jamnagar in western
India and has among the best margins in the industry.

Reliance reported gross refining margins of $7.60 a barrel
for the March quarter, down from $9.20 a year ago.

MARGINS

Gupta said he expected refinery margins to rise in coming
quarters as the northern hemisphere summer driving season demand
kicked in and improved profits for making gasoline.

“Going forward, once the gasoline cracks are better, margins
can only go up,” he said. “Definitely complex refineries have to
make more margins.”

The company is currently negotiating with the government in
the western state of Gujarat more time to repay a $1.24 billion
sales tax due after India’s top court dismissed Essar’s petition
seeking a review of an earlier verdict to defer payment.

Essar, which has already booked a 40 billion rupees loss in
its books for the tax liability, hopes to service repayments
from the increased cashflows of its expanded refinery, but is
also in talks with several banks to raise funds for the payment,
Gupta said, but declined to name the banks.

“If the Gujarat government insists on some interest, to that
extent our earnings will definitely get impacted. But going
forward, we see strong cash flows and earnings, so we are not
unduly worried,” Gupta said.

Essar will be able to use heavy crude for almost 80 percent
of its capacity and is gradually shifting to Latin American oil
from Venezuela, Colombia, Mexico and Brazil.

“Middle East crude slowly will get reduced in our basket. If
they are not low API, if they are costlier, we will reduce.
Ultimately, it’s a question of optimising margins,” Gupta said.

Essar is also reducing dependence on oil from Iran, its
single largest supplier, in line with plans by other Indian
refiners as international sanctions target the flow of Iran’s
exports. The U.S. and its allies aim to reduce Iran’s oil
revenues to pressure Tehran not to build nuclear weapons.

Essar had renewed a contract with Iran in January for
100,000 bpd, Gupta said, the same volume as last year.

Iranian crude would account for around 25 percent of Essar’s
supplies when the expansion was completed, down from around 40
percent, he added.

Industry sources have told Reuters Essar plans to cut 15
percent from its 100,0000 bpd contract, which runs from April
2012 for a year. Gupta declined to comment.

Earlier this month, data published by a leading industry
consultant showed India has vaulted to the top of the list of
Iran’s oil customers, overtaking China, in a first-quarter
buying surge ahead of tighter sanctions against Tehran this
summer.

India’s Iranian crude imports could fall around 25 percent
from April, when new annual contracts take effect.

(Editing by James Jukwey)

Patel said initial production from the state would go to local steel mills, but a resumption of mining means the world’s third-biggest supplier of iron ore could hope to regain its $6 billion, 100 million tonnes average annual exports, mainly to China, in 2012/13.

“In two to three months mining should happen, I believe the problem will be resolved by July,” Patel told Reuters in an interview, adding exports from Karnataka should then follow. He did not give a timeframe for such shipments.

Last week, the Supreme Court allowed mining to restart in mines of more than 50 hectares in Karnataka after their environmental plans are approved, potentially bringing 4.5 million tonnes per year to local steel producers. The state-run NMDC was earlier allowed to mine 1 million tonnes of ore every month by the apex court.

The union government has struggled to shape a mining policy balancing the drive by miners for exports with the need to ensure future supply to domestic steelmakers, who are ramping up production to supply India’ economic expansion.

India’s steel industry is aiming to produce between 100 and 110 million tonnes by 2020, up from existing capacity of 70 million, a target that would require almost all of the country’s entire existing iron ore output.

Patel said India would continue to export iron ore until domestic steel companies adopted technology that would allow them to process ore fines.

“Right now about 70 percent of our exports is of fines. If we don’t export then we have a storage problem,” he said. “And even when Indian steel companies begin using fines, we hope to have added to our mining capacity. And as long as we have surplus we will export.”

Just over half of India’s annual production of 240 million tonnes of iron ore is of higher grade, coveted by both domestic steelmakers, who lack the technology to use ore fines, and exporters who get a better price for higher quality.

“Our policy is clear. We have to provide for our own industries,” Patel said.

ILLEGAL MINING

The government wants to conserve resources, but says it opposes a blanket ban on exports. Some state governments, such as Karnataka, want a ban. The uncertainty around export policy has hurt India’s reputation as a stable supplier of iron ore.

Illegal sales have only worsened matters. Such mining in India is widespread and usually entails removing resources outside permitted zones. In an ongoing case in Karnataka, an anti-corruption ombudsman exposed an alleged $3.6 billion exports scam and described a “mafia-type of operation” with links between politicians and mining.

The Supreme Court has also cracked down, banning mining in Karnataka last year due to environmental concerns. The court is gradually lifting that ban.

It has also asked the state to resume exports of iron ore, but the state government has yet to approve any shipments.

Patel said the government was taking steps to rein in illegal sales, including setting up satellite tracking of consignments and electronic checkposts.

The government has also proposed a mining bill that will create an independent regulator, with the aim of improving transparency. The bill imposes profit and royalty sharing arrangements with villagers as well as encouraging foreign investment.

“I expect the bill to be approved by parliament around August when it convenes,” Patel said.

(Editing by David Holmes)