Indian state refiners will cut oil imports from Iran in 2017-18 by a fifth, as New Delhi takes a more assertive stance over an impasse on a giant gas field that it wants awarded to an Indian consortium, The Times of India reports.
India, Iran’s biggest oil buyer after China, was among a handful of countries that continued to deal with the Islamic Republic despite Western economic sanctions over Tehran’s nuclear programme.
However, previously close ties have been strained since the lifting of some sanctions last year as Iran adopts a bolder approach in trying to get the best deal for its oil and gas.
The spat has been caused due to the issue over Iran delaying awarding the concession for development of the Farzad B, a major project that a group of Indian oil companies, headed by Oil and Natural Gas Corporation (ONGC), wants to bag.
Unhappy with Tehran, India’s oil ministry has asked state refiners to cut imports of Iranian oil, sources familiar with the matter told the newspaper.
“We are cutting gradually, and we will cut more if there is no progress in the matter of the award of Farzad B gas field to our company,” one of the sources, who is affiliated to one of the bidding companies from India, said.
Indian refiners have reportedly told a National Iranian Oil Co (NIOC) representative about their plans to cut oil imports by a fifth to 190,000 barrels per day (bpd) from 240,000 bpd, officials present at the meeting said.
Indian Oil Corp and Mangalore Refinery and Petrochemicals Corp will reduce imports by 20,000 bpd each to about 80,000 bpd. The Bharat Petroleum Corp and Hindustan Petroleum Corp will together cut imports by about 10,000 bpd to roughly 30,000 bpd, they said.
In turn, NIOC threatened to cut the discount it offers to Indian buyers on freight from 80% to about 60%, the officials added.
The Indian companies or the NIOC refused to comment on the matter to The Times of India.
Cutting imports from Iran amid an OPEC-led supply cut aimed at propping up the market exposes India’s refiners to the risk of struggling to find reasonably priced alternatives.
Despite this, experts say Indian oil companies would feel no major impact from cutting Iranian imports, mainly due to their specific requirements.
“Their main requirement is lighter oil, and light oil will remain in oversupply despite OPEC cuts, as OPEC cuts are mainly medium heavy sour,” Ehsan ul Haq of London-based KBC Energy Economics told the daily.
From April last year to February 2017, India imported 542,400 bpd from Iran, compared to 225,522 bpd a year earlier. Average oil volumes supplied by Iran over this period were the highest on record.
Under sanctions, Iran was banned from the global financial system, preventing the field’s development.
India was one of the few countries still supplying Iran with goods, devising a complex payment mechanism to help Tehran access non-sanctioned items including medicines.
As new options have opened up for Tehran since the lifting of sanctions, Iran may now be awaiting better bids for Farzad B.
ONGC Videsh has submitted a $3bn development plan to Iranian authorities to develop the offshore field estimated to hold reserves of 12.5tn cubic feet, with a lifetime of 30 years.
“They (Tehran) are playing hardball … We don’t see any forward movement on that (Farzad B)… So we have reduced (crude) imports,” the Indian official said.
