New Delhi: In an attempt to quickly leverage the opportunities offered by Iran’s historic deal with six world powers on Tuesday, India’s oil minister Dharmendra Pradhan may be visiting Iran shortly.
“India will be sending the petroleum and natural gas minister shortly to Iran,” said a person aware of the development who spoke on condition of anonymity.
India’s attempt to expedite its engagement with the energy rich nation comes in the background of expectations around Iran opening up its substantive hydrocarbon reserves, which may also include production-sharing contracts.
Fear of sanctions prevented India from participating in such projects in the past. The sanctions related to Iran’s nuclear programme, which the country has now agreed to curb.
A spokesperson of India’s ministry of external affairs declined to comment.
A petroleum ministry spokesperson said there is “no information” about Pradhan’s visit to Iran “as of now”.
Of the 189.43 million tonnes (mt) per annum of crude oil sourced by India last year, 109.76 mt came from West Asia. Of this, Iran supplied 10.95mt, making up 5.78% of Indian crude oil imports.
Sending the petroleum minister “would send a very good signal to the people of Iran,” said Anil Razdan, former additional and special secretary in India’s petroleum ministry. “We should certainly be able to convey that we value our economic and strategic relationship with them. It has to be a win-win situation.”
The agreement will make it easier for India to pay for the oil it buys from Iran in rupees while chalking out revival plans for a gas pipeline from Iran through Pakistan to India. Iran is also key for India as the country seeks sea and land routes to mineral- and resource-rich Afghanistan and Central Asia. India, which had signed a preliminary pact for the development of Iran’s Chabahar port in May, is also looking to upgrade it into a commercial agreement.
Pradhan met with Iran’s petroleum minister Bijan Namdar Zangenah in June to discuss building a gas pipeline from Iran to India through various alternative routes.
After India and the US signed a civil nuclear deal in 2008, several Iran-related Indian projects have either been put on hold or dropped. India also decided to focus on the Turkmenistan-Afghanistan-Pakistan-India gas pipeline instead of the Iran-Pakistan-India pipeline project.
An Indian consortium comprising ONGC Videsh Ltd (OVL), Indian Oil Corp. Ltd (IOC) and Oil India Ltd won a bid for the Farsi block back in 2002 from National Iranian Oil Co. Although the consortium does not have ownership rights, it was to be paid a 15% return on investment once it was awarded development rights for the Farzad-B gas field in the offshore Farsi block.
A senior OVL executive requesting anonymity expressed confidence in the execution of the contract.
Not all good
Iran’s re-entry into the mainstream could erode the discount offered to the Indian refiners which is around $6 per barrel.
“In a situation where the Iranians are free to sell to anyone why should they offer a discount to Indian firms,” said a Delhi-based analyst who did not wish to be identified.
India follows the US, China and Russia in energy use, accounting for 4.4% of global energy consumption. Petroleum product consumption in India has been growing. According to the oil ministry, it grew 3.14% to around 163.17 mt in 2014-15.
With Iran coming to market, the assumption is that there will be further slide in oil prices… India will be one of the beneficiaries of sliding oil prices,” Pradhan said on Wednesday.
Crude oil prices in the Indian energy basket averaged at $61.75 per barrel in June, against $84.16, $105.52, $107.97 and $111.89 in 2014-15, 2013-14, 2012-13 and 2011-12, respectively.
State-owned firms such as IOC are hopeful of sourcing crude oil from Iran at a time when the refiner plans to fully operationalize its 15 million- tonne-per-annum Paradip refinery. Built at a cost of Rs.34,555 crore, this is among the most advanced refineries in the world and can process heavy crude oil with a high sulphur content.
Source: Mint; 16 July 2015