Indian companies have begun talks with alternative suppliers to slowly replace Iranian oil, fearing their current mechanism for payments to Tehran for some 350,000 barrels a day (bpd) via Turkey could soon succumb to sanctions, industry sources said.

Plans for fresh US financial sanctions on Tehran have worried its Asian customers who fear they will have no way to pay for crude imports from Iran.

India, which a year ago lost one conduit for payments, is already looking for alternatives as Halkbank, the Turkish bank handling some transfers, refused to open an account for Indian refinery Bharat Petroleum.

Indian refiners are also upset that Iran has asked them to pay about $15 million as interest on delayed payments in the first seven months of 2011 when they could not transfer funds.

India's biggest refiner, Indian Oil Corporation, has sought an additional two million barrels of crude from Saudi Arabia for January, a source privy to the development said. IOC buys about 30,000 bpd oil from Iran.

Saudi Arabia has not yet agreed to supply the extra barrels, this source said. Allocations for January have already been done.

India's Mangalore Refinery and Petrochemicals, the biggest Indian client of Iran with imports of about 150,000 bpd, has sought extra supplies from Saudi Aramco and Kuwait Petroleum, a separate source said.

Saudi has already agreed to supply 20,000 bpd extra barrels to MRPL in 2012.

Another Indian refiner, Hindustan Petroleum, plans to tap the spot market for low sulphur oil to help it meet local pollution regulations, besides seeking more volumes from other suppliers, a company source said.

HPCL earlier this week issued a spot tender after a gap of about 10 months for purchase of sweet crude oil.

A local state pollution control body has asked it to either cut runs at its southern India plant or lift processing of low sulphur oil. HPCL buys about 70,000 bpd oil from Iran.

The latest US proposals allow countries allied to the United States to seek exemptions.

Officials at Indian oil firms say they would approach the country's oil ministry to ask it to request exemptions.-Reuters