Iran dismisses India's threat to cut oil imports

New Delhi: Iran has dismissed India's decision to cut oil imports from Tehran by a fifth over delay in award of a gas field and said it has other buyers.

Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (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, a top official said.

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.

Iranian Oil Minister Bijan Zangeneh reacted 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."

India's Oil Minister Dharmendra Pradhan, however, refused to join the issue saying he does not interfere in commercial decisions of oil companies.

"I don't know," he said when asked about the decision by state-owned refiners to cut imports from Iran.

Oil companies take their own decisions, he told reporters on sidelines of an industry conference here. "It depends on oil companies (to buy crude oil from where). We do not interfere in those decisions."

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.

Since lifting of the sanctions last year, Iran is playing hardballs 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 $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.

Now, the deal is being targeted to be wrapped up by September after the two sides agree on a price and a rate of return for OVL's investments.

Farzad-B was discovered by OVL in the Farsi block about 10 years ago. The project has so far cost the OVL-led consortium, which also includes Oil India and Indian Oil Corp (IOC), over $80 million.

Iran was initially unhappy with the $10 billion plan submitted by OVL for development of the 12.5 trillion cubic feet (tcf) reserves in Farzad-B field and an accompanying plant to liquefy the gas for transportation in ships.

It felt the $5 billion cost OVL and its partners have put for developing the field was on the higher side and wanted it to be reduced. OVL will earn a fixed rate of return and get to recover all the investment it has made in the field development.

The field in the Farsi block was discovered by the OVL-led consortium in 2008. It has an in-place gas reserve of 21.7 tcf, of which 12.5 tcf is recoverable.