India to Cut Iran Oil Imports in Row Over Gas Deal

Indian state refiners will cut oil imports from Iran in 2017/18 by a fifth, as New Delhi takes a more assertive stance over an impasse on a giant gas field that it wants awarded to an Indian consortium, sources familiar with the matter said.

India, Iran's biggest oil buyer after China, was among a handful of countries that continued to deal with the Persian Gulf nation despite sanctions over Tehran's nuclear program, Reuters reported.

However, previously close ties have been strained since the lifting of international sanctions last year as Iran adopts a bolder approach in trying to get the best deal for its oil and gas projects.

Unhappy with Tehran, India's Oil Ministry has asked state refiners to cut imports of Iranian oil.

"We are cutting gradually, and we will cut more if there is no progress in the matter of the award of Farzad B gas field to our company," one of the Indian sources said.

Indian refiners told a National Iranian Oil Company representative about their plans to cut oil imports by a fifth to 190,000 barrels per day from 240,000 bpd, officials present at the meeting said.

Indian Oil Corp and Mangalore Refinery and Petrochemicals Corp will reduce imports by 20,000 bpd each to about 80,000 bpd. Bharat Petroleum Corp and Hindustan Petroleum Corp will together cut imports by about 10,000 bpd to roughly 30,000 bpd, they said.

In turn, NIOC threatened to cut the discount it offers to Indian buyers on freight from 80% to about 60%, the officials added.

From April last year to February 2017, India imported 542,400 bpd from Iran, compared to 225,522 bpd a year earlier. Average oil volumes supplied by Iran over this period were the highest on record.

  Gas Field Dispute

At the heart of the spat is that a group of Indian oil companies headed by Oil and Natural Gas Corp wants to develop Iran's Farzad B gas field. Iran has yet to hand out a concession that would allow its development.

ONGC Videsh has submitted a $3 billion development plan to Iranian authorities to develop the offshore field estimated to hold reserves of more than 350 billion cubic meters, with a lifetime of 30 years.

Under sanctions, Iran was banned from the global financial system, preventing the field's development.

India was one of a few countries supplying Iran with goods, devising a complex payment mechanism to help Tehran access non-sanctioned items including medicine.

As new options have opened up for Tehran since the lifting of sanctions, Iran may now be awaiting better bids for Farzad B.

"They (Tehran) are playing hardball ... We don't see any forward movement on that (Farzad B)... So we have reduced (crude) imports," the Indian source said.