Iran tries to woo India with lucrative oil freight discounts

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Iranian oil companies shipped 4,42,800 barrel per day of oil to Indian shores during April 2017 to January 2018 period. Beginning from April 2018 they expect India to purchase more.

In a jointly held press briefing last week with his Iranian counterpart in New Delhi, Indian Minister for Petroleum and Natural Gas Dharmendra Pradhan said: “It will be beneficial for India to buy more crude from Iran rather than from other countries. We have agreed that India will buy more crude oil from Iran in coming days.”

On his part Iranian Oil Minister Bijan Namdar Zanganeh said he is looking forward to inking a deal awarding rights of Farzad-B gas field to ONGC Videsh. He expects India’s oil companies to buy 0.5 million barrels of crude oil during FY 2019 (25 million tonnes per annum).

India is world’s third biggest oil consuming nation and Iran used to be the second biggest supplier to it before UN enforced sanctions took effect. However, 2017 witnessed Iran assuming the first place, while Saudi Arabia slipping to the second.

ONGC Videsh (OVL) has currently offered to invest about US$6.2 billion to develop Farzad-B gas field in the Persian Gulf.  India’s offer price is US$4 per million British thermal units (mmBtu), while gas is locally priced at US$2.1 mmBtu in Iran. As per the proposal Iran would do the marketing of the gas.

OVL’s offer of US$11 billion for the same gas field last year didn’t mature to a deal owing to dispute over fuel pricing. Thanks to the delay in the award, India’s current financial year (FY 2018) oil import from Iran is lower by 25% compared to the previous year. In FY 2017 the country imported 510,000 barrels per day of Iranian oil.

Zangeneh said he is optimistic about the future of relationship between two countries, especially for oil and gas fields development. He added he is also hopeful of signing the agreement with Indian companies for developing Farzad-B by 2018.

An Indian team is expected to visit Tehran soon in this regard.

The joint statement issued after talks between India's Prime Minister Narendra Modi and visiting Iranian President Hassan Rouhani called for a speedy negotiation of the gas field deal.

“Noting the complementarity of interests and natural partnership in the energy sector, it was agreed to move beyond traditional buyer-seller relationship and develop it into a long term strategic partnership, both sides agreed to continue and increase the pace of negotiation for reaching appropriate results on energy cooperation, including Farzad-B gas field,” the statement said.

Iran has reportedly agreed to raise the freight discount on oil sales to India for a requital of increased oil imports.