Policy
Controversial OVL-Imperial Energy Deal Likely To Be Re-Opened
more...


Long Distance Yet To Be Covered With Iran Over Farzad Block
more...


Political Deal Brings Some Respite To OVL In Venezuela
more...


Govt. Finds Tough Pushing For Increased Usage Of Gas In Transport
more...


Domestic Politics To Deepen Petroleum Relations With Myanmar, Bangladesh
more...

Regulation
ONGC To Improvise For Design & Execution To Back Stage-Gate Process
more...


$13 Billion Rosneft - Essar Oil Deal Facing Further Delay
more...


Govt.’s New Aviation Scheme Will Boost Jet Fuel Consumption
more...


Oil India Enters Manipur In Search Of Hydrocarbons
more...

Alternative Energy / Fuel
A 2G Ethanol Bio-Refinery At Bathinda
more...


Indizel To Be Sold Through Franchisee -Operated Stations
more...

New Projects
Petronet LNG Shortlisted For Matarbari LNG-Import Terminal
more...


BPCL To Set Up Rs 3.37 Bn Pipeline Project In Kerala
more...

Market Watch
LPG Demand Grows
more...

Companies
Afcons Infrastructure Ltd
more...


IGL To Emerge As A Major Independent Player
more...


MRPL: GRM Up, Highest Ever Turnover And Profits
more...


CPCL Records Highest Throughput In 2016-17
more...

Press Release [FREE Access]
Petro Intelligence » Iran Uses Chennai Petroleum As Bargaining Chip?

By R. Sasankan

Ali KardorNever too close, never too distant: that is how one could characterise the relations between India and Iran. The two countries have never had to sort out prickly diplomatic issues in the past. But at the conclave of Islamic nations, Iran had tended to support Pakistan on the Kashmir tangle while its traditional foe Iraq – especially under slain ruler Saddam Hussein -- backed India.

Indian public sector companies have been more successful in Iran than in India in discovering oil and gas as it is a hydrocarbon-rich country. India’s ONGC, in partnership with a foreign oil major, discovered oil in the 1970s in Iran. But the Iranian government took over this field under its nationalisation policy. In recent years, the Indian PSUs have discovered a huge gas field in the Farzad B block. As it was not covered by a production-sharing contract, the Iranian government had to decide who would develop the field. Soon after, the US sanctions severely crippled business relations with Iran.

Now that those sanctions have been lifted, an Indian consortium is in the race to grab the rights to develop the gas field. However, the outcome is unpredictable as multinational oil giants with whom Iran has been quite familiar and friendly are understood to be making enticing offers. The decision will be politically influenced since it has to be made so soon after the sanctions were withdrawn. Market circles reckon that Iran may not choose to put all its eggs in the same old baskets.

Dharmendra PradhanMeanwhile, Iran and India are currently engaged in some quiet bargaining over a refinery project which the Chennai Petroleum Corporation Ltd (CPCL) intends to put up at Nagapattanam in the Cauvery basin in the south Indian state of Tamil Nadu. The proposed capacity for the refinery is 9 million tonnes per annum which will be established at an estimated cost of Rs 270 billion. The refinery could later be expanded to 15 million tonnes. CPCL already has a 1 million tonne refinery in that location in addition to its 10.5 million tonne per annum refinery at Manali near Chennai.

Iran has the unique distinction of being the only one from the oil-rich Middle East to invest in a refinery in India. Perhaps, this is the only investment that Iran has so far made in India. It happened way back in 1965 when the Indian government in partnership with Amoco and National Iranian Oil Company (NIOC) set up a 6 million tonne per annum refinery called Madras Refinery Ltd (MRL). In the 1970s, Amoco pulled out of MRL but NIOC opted to stay put. The Indian government later divested its stake in MRL to Indian Oil Corporation (IOC) which rechristened MRL as Chennai Petroleum Corporation Ltd (CPCL) and made it its subsidiary with a 52 per cent stake.

CPCL was designed to process Iranian crudes like Iranian heavy and Lavan blend which are known to have a high sulphur content and be highly acidic. Although the listed price of Iranian crude is above the Arab Heavy, it is cheap in the international market as many refiners are not able to process this crude. This forces Iran to sell its crude cheaper. Indian companies such as RIL and Essar Oil are understood to have struck long-term deals for Iranian crude at a very favourable price which includes partial rupee payment and long-term credit. This happened prior to the lifting of sanctions.

Sanjiv SinghSeveral other factors pushed down the price of Iranian crude. Post sanctions, Iran is eager to increase crude oil exports as it is not covered by OPEC quotas at least until May 2017. Iran is not allowed to export crude to the US.

Being an equity partner in CPCL, NIOC has a say in the new refinery project. NIOC is keen to put in its share of equity subject to certain conditions: it wants a 50 per cent share in the refinery’s capacity to process Iranian crude which is being offered at a premium of $ 2 over the Arab Heavy.

A final decision on these demands will again be political as Indian Oil Corporation (IOC) has to consult the government before deciding on it. Sources say both CPCL and IOC are opposed to NIOC’s demand. The proposed refinery configuration includes a hydrocracker unit to maximise the yield of middle distillates. If Iranian crude is used as 50 per cent of the total feedstock, then the middle distillate yield will come down by 1-2 per cent. Obviously, this coupled with the demand for a premium on crude price will adversely impact the IRR. (MRPL, which was also designed to process Iranian crude, suffered when the US imposed sanctions against Iran as it could not get adequate quantities of crude of the same quality. It was bailed out by Saudi Arabia).

The question now is this: will Iran use the CPCL project as a bargaining chip for awarding the Farzad B block to Indian PSUs for development? There are no definite indications of this as yet. There is a win-win proposition for both sides: Iran needs India which is poised to become one of the top four major crude consumers in the world. For India, Iran offers a lot of business opportunities.



To download the latest issue 'Volume 24 Issue 4 - May 25th 2017', click here
Petro Intelligence [FREE Access]
Sarraf Could Win An Extension At ONGC
more...

Cheap LNG: A Distant Dream
more...

Sarraf Awarded A New Bailiwick. Why Now?
more...

Tit-for-tat Threat Looms Over Iran Gas Deals
more...

Foreign Investment
Aemetis Wins Biodiesel Supply Contract To India
more...


Matrix Bharat Launches Physical Operations In Mumbai
more...

Overseas Investment
ONGC Videsh Demands $ 418mn From Sudan
more...

Gas Scene
CGD entities in India need fresh thinking
more...


Domestic Natural Gas Scene In April 2017
more...


Coal Bed Methane Resources in India
more...


State-wise GA-wise CNG Consumption during 2016-17
more...


India’s Gas Pipeline Status and the Initiatives
more...


Update : Capacity Utilization of LNG Regasifcation Terminals
more...


Coal Bed Methane (CBM) Gas Development in India
more...


CGD Factsheet as of March 2017
more...


Sector-wise gas consumption of domestic gas and RLNG - an update
more...


LNG Imports FY 2011 -12 to 2016-17
more...


Natural Gas Demand Projections 2017-18 To 2021-22
more...


PNG Status
more...


India’s Installed Power Generation Capacity
more...


LNG Developments
more...

Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
PSU Average Distillates Yield (%wt.)
more...


Operator-wise Exploratory Work under PSC Regime
more...


Power deficit: Region-wise position for March, 2016
more...


Development of Hydrocarbon Discoveries under PSC Regime
more...


Crude price (Indian basket) and Domestic gas price: Month-wise
more...


Petroleum Industry Marketing Infrastructure As On April 1, 2017
more...


LPG Consumption Continues To Surge Despite PNG Penetration
more...


Export of Petroleum Products
more...


Significant variations in import of crude oil and petroleum products
more...


Update: Regasification infrastructure
more...


Expansion of Existing Refineries
more...


Exploratory Inputs by ONGC and OIL as on 1st January, 2017
more...


Exploratory Inputs since inception under PSC Regime
more...


Basin-wise PEL & PML with Pvt./ Joint Venture Companies as on 1st January, 2017
more...


Basin-wise operative PEL & PML under Nomination Regime as on 1st January, 2017
more...


Refinery Capacity & Refinery Crude Throughput in recent years
more...

Tenders [FREE Access]
Indian Oil Corporation
more...


Reliance Industries
more...


ONGC
more...


ONGC
more...