* Firm buys extra oil from Saudi, U.A.E to make up for Iran shortfall
* Seeking another oil cargo using Iranian insurance, ship
* Plans to sign short-term deal with Azerbaijan
* Chances of low Iran supplies exist at least until October
By Nidhi Verma
NEW DELHI, Aug 21 (Reuters) - India's Mangalore Refinery and Petrochemicals Ltd has drawn up a plan including tapping spot markets for more high sulphur oil as imports from Iran, its biggest supplier, have been hit by western sanctions, its managing director said on Tuesday.
Refiners in India, Iran's biggest oil client after China, have struggled to find insurance and shipping for imports since the European Union brought in sanctions on July 1 banning most major insurance firms from covering Iranian oil shipments.
The sanctions against Iran's nuclear programme, which the West thinks is aimed at making weapons, are meant to cut the country's oil revenues.
MRPL, Iran's biggest Indian client, aims to buy 100,000 barrels per day (bpd) from Iran in the year to March 31, 2013, a decline of 20 percent from a year ago, helping India secure a waiver from U.S. sanctions targeting financial institutions.
"I got a shortage of crude. That's why there were emergency tenders ... because Iran volume is high sulphur so I have to make up for the loss through tenders," P. P. Upadhya told Reuters in a telephone interview.
MRPL has floated two tenders seeking to lift 600,000 barrels each of high sulphur and low sulphur oil in the first half of October.
When asked if MRPL will float more spot tenders, Upadhya said: "There will be. Let's see how we get responses to this tender."
The share of non-Iranian supplies in India's crude basket is gradually rising, indicating the emergence of new trade routes. Tehran's exports halved in July to about 1 million bpd under pressure from the sanctions.
Upadhya said his firm is already buying extra oil from its term suppliers like Saudi Arabia and the United Arab Emirates to help make up for the depleted Iranian supplies.
MRPL in July loaded only one cargo of 660,000 barrels from Iran compared with the five it had planned to lift.
In August so far, it has managed to lift only two cargoes, one using an Iranian ship and insurance cover while the other was shipped with an Indian-flagged vessel and insurance. It normally takes between four and six cargoes -- all aframaxes -- from Iran in a month.
It is seeking another cargo for lifting this month using an Iranian ship and insurance, Upadhya said.
India is selectively allowing refiners to import oil using Iran's ships and insurance cover because New Delhi wants to protect business for its domestic shippers and insurers.
But Iran does not have enough aframaxes to fill MRPL's needs. Using Indian shippers is difficult because they feel insurance cover provided by local firms is inadequate, while the freight rate charged by its one domestic shipper was very high.
MRPL planned to have a single point mooring facility which could handle ships bigger than aframaxes in use by May but repeated delays have now pushed that back to end-September.
Bad weather has been the most recent problem for work, Upadhya said, indicating the possibility of lower supplies from Iran at least until October.
The refiner is also thinking of signing a short-term deal with Azerbaijan to buy Azeri light crude, he said. MRPL's two-month deal with Azerbaijan ended this month.
"Being a public sector company I cannot afford to cut throughput. I have to run for the country," he added.
Editing by Jo Winterbottom and Joseph Radford