India seeks to invest $20 bn in Iran as country steps out of international sanctions

Seeking to improve energy ties with Iran, Oil Minister Dharmendra Pradhan during his ongoing two-day visit to Tehran announced that India has offered to invest $20 bn in a new petrochemical fertilizer as well as oil and gas projects with the country.

He also discussed with his Iranian counterpart the repayment of nearly $ 6.5 billion that Indian refiners owe to Iran, but there is no agreement yet on rights to develop Farzad-B gas field in the Persian Gulf discovered by OVL.

The minister informed the Iranian side that Indian companies could invest up to $ 20 billion and are interested in setting up petrochemical and fertiliser plants, including those in Chabahar SEZ, either through a joint venture between Indian and Iranian public sector companies or with private sector partners.

“In this regard, he requested Iran to allocate appropriate and adequate land in the SEZ. He also requested the Iranian side for favourable treatment in the pricing of gas for India and supply of rich gas at competitive price on long-term basis for the life of joint venture projects Indian companies are interested in setting up,” an official statement read.

Pradhan said India did a fine balancing act after Prime Minister’s visit to Saudia Arabia earlier this month.

Accompanied by ONGC Videsh MD Narendra K Verma and Indian Oil Corp (IOC) Chairman B Ashok, Pradhan sought to engage with the leadership of the oil-rich nation that has stepped out of international sanctions.

This was the first visit by an Indian minister since the US and other western powers lifted sanctions against Iran in January.

Within days, Chinese President Xi Jinping travelled to Tehran, signing 17 accords and agreeing to increase bilateral trade by more than ten-fold to $ 600 billion in the next decade.

“Pradhan had meetings with Minister of Petroleum Bijan Namdar Zanganeh, Senior Advisor to President of Iran on Free Trade Zones Akbar Torkan and Governor of Iranian Central Bank Dr Valliolah Seif,” the statement said.

The two nations, it said, discussed developments regarding Farzad-B gas field and expressed confidence in concluding an agreement at the earliest.

“The issue relating to payment of dues by Indian refineries to Iran towards purchase of crude oil was also discussed. Pradhan conveyed that India is committed towards making payments as and when banking channels, acceptable to both sides, are available,” the statement added.

He said competitive gas pricing is crucial in making the projects attractive for prospective investors. He also expressed India’s interest in setting up an LNG plant and a gas cracker in the Chabahar port.

New Delhi is looking to increase engagement with the sanction-free Iran by raising oil imports and possible shipments of natural gas. It also wants rights to develop Farzad-B gas field in the Persian Gulf discovered by OVL.

Sources, however, said a deal for field was not signed during Pradhan’s visit as Iranian Parliament, Majlis, is yet to approve new Iran Petroleum Contract (IPC) under which the Farzad-B field is to be given to the OVL-led consortium.

IPC ends two-decade old buyback system that prevented foreign companies from booking reserves or taking equity stakes in Iranian companies. Under some circumstances, the new model allows reserves to be booked, but foreign companies would still not own oil fields.

While previously foreign firms were paid a fixed fee for discovering and bringing to production an oil and gas field, the new model raises their profit by grading the fee based on the risk of the fields, allows contracts to last for up to 25 years and no ceiling on capital expenditure.

Foreign firms are to be paid a fee per barrel and they will also be entitled to an increase in profits in the face of dramatic oil price fluctuations.

Indian firms have so far shied away from investing in Iran for the fear of being sanctioned by the US and Europe. The same was deterring New Delhi from claiming rights to invest nearly USD 7 billion in the biggest gas discovery ever made by an Indian firm abroad.

But after the lifting of sanctions, India is making a renewed pitch for rights to develop 12.8 trillion cubic feet of gas reserves OVL had found in 2008.

Pradhan also conveyed to the Iranian side that both countries must expand the basket of oil and gas trade.

He expressed India’s interest in importing LPG from Iran and said companies from both sides could discuss on setting up an extraction plant in Chabahar, if required. Both sides agreed to continue examining various means of evacuation of gas such as LNG, including through the proposed Iran-Pakistan-India pipeline.

Pradhan visited Chabahar Free Trade Zone and Port for a site visit and discussed the facilities and incentives which could be offered to Indian companies.

The visit came nine years after the previous visit by an Indian minister of Petroleum & Natural Gas. It was the first visit of an Indian minister to Iran after sanctions were lifted this January.

--PTI