India plans to cut oil imports from Iran by nearly 25 per cent as the row over the right to develop a natural gas field in the Gulf nation escalates.
The row over the development of Farzad B natural gas field would cut the import to 370,000 barrels per day (bpd) of crude, from current 510,000 barrels per day (bpd), according to a report by Reuters.
IOC and MRPL -- largest state buyers of Iranian crude -- will cut imports from Tehran to 4 million tonnes in 2017-18 from 5 million tonnes in the previous year, according to an April report by PTI.
Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) will cut oil imports from Iran by 0.5 million tonnes each to 1.5 million tonnes as New Delhi built pressure on Tehran to award the Farzad-B field to its discoverer, ONGC Videsh Ltd.
Iran has deterred in awarding rights to develop the 12.5 trillion cubic feet discovery OVL had made 10 years back and now New Delhi is using its oil imports as a bargaining tool to get Tehran to agree.
India is Iran's second biggest oil buyer after China and was among a few which had continued to import crude despite Western sanctions against Tehran.
Farzad-B gas field discovery
Farzad-B was discovered by the OVL- led consortium in the Farsi block in 2008. It has an in-place gas reserve of 21.7 tcf, of which 12.5 tcf is recoverable. The project has so far cost the OVL-led consortium, which also includes Oil India and IOC, over USD 80 million.
Since lifting of the sanctions last year, Iran is playing hardball over award of rights to develop Farzad-B gas field in the Persian Gulf to OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC).
OVL has submitted a revised master development plan of over USD 5 billion for developing the field.
The new plan, filed with Iranian Offshore Oil Company (IOOC), excludes liquefaction facilities to turn the gas into LNG for ease of shipping to nations like India, sources said.
The two nations were initially targeting concluding a deal on Farzad-B field development by November 2016 but later mutually agreed to push the timeline to February 2017.
Iranian Oil Minister Bijan Zangeneh had last month dismissed the threat of cutting imports, saying, "We cannot enter deals under threats."
"Using language of threats is not appropriate," Zangeneh was quoted as saying by Iranian news agency Irna. "There are a lot of customers for Iranian oil and their demand surpasses our export capacity."
Oil field not the only point of contention
The two countries are also involved in a row over credit period and discount to Indian buyers on freight.
Iran used to give a 90-day credit period to refiners like Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) to pay for the oil they would buy from it. Now, Tehran has reduced this to 60 days.
National Iranian Oil Co (NIOC) has also decided to cut the discount it offers to Indian buyers on freight from 80 per cent to about 60 per cent.