India and Iran have agreed to boost energy cooperation, with Tehran eyeing increased crude oil sales to the Asian importer, while New Delhi explores the potential for Indian companies to invest up to $20 billion in various projects in the Middle Eastern country.
After holding talks with visiting Indian oil minister Dharmendra Pradhan in Tehran, Iranian oil minister Bijan Zanganeh said he was hopeful that crude oil exports to India would rise from the current 350,000 b/d.
"We hope that this figure is increased with the support and assistance of the Indian government, now that sanctions have been lifted," Zanganeh was quoted as saying by Shana news agency.
The Indian side has positively responded to the offer.
"Iran is the sixth-largest oil exporter to India. But we would like Iran to increase its oil exports to India and regain its previous position," Pradhan was quoted as saying by Shana.
According to latest shipping data obtained by Platts and cFlow, Platts trade flow software, Iran was the sixth-largest crude oil supplier to India in the January-February period, with imports at 1.74 million mt, up nearly 13% from 1.54 million mt in the same period a year earlier.
Pradhan, who led a delegation to Iran over the weekend, told his counterpart that Indian companies would be willing to participate in some joint ventures in areas of petrochemicals and fertilizers, and urged Tehran to allocate land for the projects in order to move forward, an Indian petroleum ministry statement quoted Pradhan as saying.
Pradhan urged Iran for favorable treatment in the pricing of gas for the potential joint venture projects that Indian companies are interested in setting up, adding that competitive gas pricing was crucial in making the projects attractive for prospective investors.
He also expressed India's interest in setting up a LNG plant and a gas cracker at Chabahar port, the statement said. "India has also a good chance to invest in the LNG sector," Pradhan was quoted as saying by Shana.
PROJECTS
Shana said Iran and India signed Saturday an accord for cooperation in such areas as gas development, refinery, petrochemicals, as well as exports of oil and derivatives.
The Indian ministry statement said that during the recent visit by the Indian minister, both sides discussed developments relating to the development of the offshore Farzad-B gas field in Iran and expressed confidence they would be able to complete all procedures soon and close the deal.
Farzad-B in the Persian Gulf holds about 13 Tcf of recoverable reserves. India's ONGC Videsh Ltd., the overseas arm of state-run Oil and Natural Gas Corp., had invested in the field before the sanctions but has not started production.
New Delhi has asked Tehran to expedite all procedures for it to start its participation in the field.
Farzad B, shared with Saudi Arabia, is part of Iran's Farsi block, which holds around 12.5 Tcf of natural gas and 212 million barrels of condensates. The gas field would produce 1.1 Bcf/d of gas in the first stage, based on initial assessments.
"India has agreed to receive the gas to be produced from this field and sell it," Zanganeh said.
PENDING PAYMENTS
Pradhan said that India was also committed to making payments it owed from its crude imports during the sanctions as soon as banking norms, acceptable to both sides, were agreed, the statement said.
India is estimated to owe over $6 billion to Iran in pending payments for crude oil supplies.
Since mid-2011, India has paid 45% of its crude import bill in rupees to Iran's account with Kolkata-based UCO Bank.
The remaining 55% was routed through Turkey's Halkbank in euros, but this was halted in 2013 under the pressure of sanctions, creating a payments backlog.
Pradhan, who had a meeting with Iran's central bank governor Valiollah Seif, said India would repay the money to Iran in cash and in euros.
"In that meeting, it was agreed that we return all the money for Iran's oil consignments and this will be done in euros. Turkey will be the banking channel between the two countries," the Indian oil minister said.
The basis of calculations, the two sides agreed, would be the dollar and the payment mechanism will be unveiled soon, he added.
Zanganeh added: "We have held negotiations in this regard and one banking channel has opened. Two more channels will be opened and the central bank can access Iran's $6 billion in India."
LPG WINDOW
India halved its Iranian crude imports to around 11 million mt/year (220,000 b/d) following the tightening of US sanctions against Iran in 2011.
Since sanctions were lifted in January, Indian refiners have said that they are open to buying more oil from Iran as long as the price was right.
Mangalore Refinery and Petrochemicals Ltd. and Essar Oil have been the top buyers of Iranian crude, with Indian Oil Corp. and HMEL Bhatinda refinery making occasional purchases.
Pradhan told Platts in an interview last month that India was actively in talks to explore the potential to lift its crude oil imports from the Middle Eastern supplier, although it is keen that Iran gives it a preferential price. And during the latest visit to Iran, Pradhan said that India was keen to import LPG from Iran to meet its growing demand, while Iran tries to establish its presence as a major Middle Eastern LPG exporter.
"He [Pradhan] expressed India's interest in importing LPG from Iran and said that companies from both sides could discuss on setting up an extraction plant in Chabahar, if required," the statement said, referring to the Free Trade Zone.
Both India and Iran also agreed to continue exploring options for export of gas such as LNG, and including through the proposed Iran-Pakistan-India pipeline, to India, the statement added.
