Reuters: India's Oil Threat to Secure Gas Field Project in Iran

On Saturday, April 1st, Reuters reported, citing several sources, that India has threatened Iran that it will reduce oil imports from Iran if a gas field development project is not awarded to an Indian company. Reuters writes that the Indian Ministry of Petroleum, displeased with Iran's new stance following the lifting of sanctions, has recently asked the country's state refineries to reduce oil imports from Iran. India is the second-largest oil customer of Iran after China. The company 'OVL,' the foreign arm of India's ONGC, discovered the 'Farzad B' gas field in the Persian Gulf about ten years ago. During the sanctions, the Indian company refrained from developing this field, but over the past two years, officials from both countries have held several rounds of negotiations regarding the development of this field. Reuters states that after the lifting of sanctions following the signing of the JCPOA, Iran's position has become 'bolder' and is demanding more concessions from the Indian company for the development of the field, prompting the Indian government to instruct 'Indian refineries to reduce oil imports from Iran by up to 20% to encourage Iran to be more flexible in agreeing to India's conditions for developing the gas field.' Currently, Indian state refineries import about 240,000 barrels of oil from Iran daily, and if Iran does not comply with India's conditions for signing the gas contract, this figure is expected to drop to 190,000 barrels for India's fiscal year. India's fiscal year begins almost simultaneously with Iran's solar year. Iran's oil imports by India are not limited to state companies; private refineries also import about 300,000 barrels of oil from Iran daily. Last fiscal year, India imported about 542,000 barrels of oil from Iran daily, which was more than double the previous year. Indian sources have told Reuters that this reduction in purchases will be implemented gradually. According to them, the National Iranian Oil Company has also threatened to reduce the shipping discount for oil to India from 80% to 60% in response to India's decision to reduce oil imports. Reuters reports that it has been unable to obtain the National Iranian Oil Company's position on this issue. As Reuters noted in its report, given the reduction in OPEC oil production, Indian state refineries may face difficulties in replacing Iranian oil with reasonably priced alternatives from other oil-producing countries; however, there are still significant amounts of surplus oil in the world. Ehsan Alhaq, an expert from KBC Energy Economics, told Reuters that the type of oil used in Indian state refineries is usually light oil, and the reduction in OPEC oil production does not significantly affect its availability in global markets. OPEC members typically produce medium and heavy oil, and Iran's major oil production is also of the medium type. Reuters reports that ONGC has proposed a $3 billion, 30-year plan to Iran for the development of the 'Farzad B' gas field, which has about 350 billion cubic meters of extractable gas.