Times of India: As US and European sanctions cripple its economy, Iran on Saturday offered India a new production sharing regime for oil exploration in an attempt to keep its third largest buyer of oil engaged.
The Times of India
TEHRAN: As US and European sanctions cripple its economy, Iran on Saturday offered India a new production sharing regime for oil exploration in an attempt to keep its third largest buyer of oil engaged.
The offer was made by Iranian foreign minister Ali Akbar Salehi during his talks with visiting external affairs minister Salman Khurshid at the India-Iran Joint Commission Meeting where energy was a subject of cooperation.
India has in the year to March 31 cut import of oil from Iran by 26.5 per cent as US and European sanctions made it difficult to ship oil from the Persian Gulf nation.
Iran traditionally offers only service contract to foreign companies, giving them a pre-fixed rate of fee for their effort in exploring and producing oil.
In contrast, a production sharing contract will give the foreign country ownership of the oil explored and produced as also the freedom to ship it wherever they want.
Indian state-run firms led by ONGC’s contract for exploring the gas-rich Farsi block too is a service contract which if converted into a production sharing regime would mean that New Delhi can get close to 13 trillion cubic feet of gas.
While making the offer Salehi said Iran should be considered a reliable source of energy for India, sources said.
India imported about 13.3 million tons of crude oil from Iran in 2012-13 fiscal, down from 18.1 million tons in the previous year. It now pays Tehran only in rupee in an Indian bank after US and European sanctions blocked dollar and euro routes.
On the rupee payment issue, Iran said that the excess accumulated in India could be routed to other projects in India, including infrastructure.
In a joint statement issued after the talks, the two sides reiterated the importance of enhancing cooperation in expanding trade and banking relations.
“The two sides agreed to study the prospects of joint investment in both countries. The two sides, while noting their capabilities in the industrial sector, agreed to diversify their cooperation in this regard,” it said.
Khurshid, who also met Iranian oil minister, noted that Iran is a major source of energy close to India’s borders and can play an important role it meeting its energy needs.
Asserting that India is determined to continue its crude imports from Iran, Khurshid said New Delhi has worked hard to maintain its crude purchases from Tehran in spite of recent difficulties in payment mechanisms, shipping and finding suitable insurance and re-insurance cover for Iranian crude.
He said some of these issues have been resolved because of cooperation by the two sides although some of them remain unresolved.
Khurshid pointed out that payment for crude imported from Iran in the recent months had become difficult and this has to be done in local currency for the time being.
India is looking at ways to increase trade with Iran as it is concerned over the “grave” imbalance. The two-way trade is around $15 billion, out of which Indian exports account only for around $2.5 billion.
Oil is the biggest item of Indian import from Iran. India feels that there is a lot of scope for increasing exports to the Persian country particularly in pharmaceuticals and food.
Khurshid said there is a shortage of life saving drugs in Iran and offered a framework of cooperation in pharma sector.
India is the third largest producer of pharma products and has the capacity to meet Iran’s urgent needs.
In the textiles sector, Khurshid suggested that Iran could have a preferential tariff arrangement on select items with India.
He announced that India will be holding international textiles exhibition in Tehran this month.
On the rupee-riyal exchange rate issue, he is understood to have said that the 3-tier exchange rate prevailing in Iran was not helping the matter and asked it to have an official rate of exchange.
