Iran’s biggest oil buyer in India is ready to throttle back imports from the Gulf nation once a new supply deal kicks in.
Essar Oil Ltd expects to lower purchases from Iran after shipments from Rosneft begin once the Russian state producer completes a deal to buy a stake in the Indian company, according to Lalit Kumar Gupta, Essar Oil’s chief executive officer. The refiner doesn’t plan to import any crude under the agreement this year and it’s undecided which country or project Rosneft will source the crude from, he said.
“When they are on board we will see how much to buy, what to buy” from Rosneft, Gupta said in an interview. The company will buy less from Iran when the supplies begin, he said.
Essar bought more than 148,000 bpd from Iran in the first six months of this year, accounting for more than 40% of the country’s purchases from the Gulf nation, according to shipping data obtained by Bloomberg. The company gets about one-third of the crude it needs for its 20mn-tonnes-a-year refinery from Iran, Gupta said.
The international affairs office in Tehran of National Iranian Oil Co, the state producer, wasn’t immediately able to comment. India is Iran’s biggest oil buyer after China, according to the shipping data.
Rising supply under the Rosneft deal complicates Iran’s efforts to hold on to its expanded market share in Asia, particularly in India, where the International Energy Agency expects demand growth in the decades ahead to outstrip all other nations. Iranian shipments to India surged 63% in the first half of the year after international sanctions that restricted its supplies were eased in January.
At nearly 403,000 bpd, Iran was India’s fourth-biggest supplier in the April-June period, trailing Iraq, Saudi Arabia and Venezuela. India isn’t a regular buyer of Russian crude and supplies during the quarter were about 8,000 bpd.
In July 2015, Rosneft signed a 10-year crude-supply deal with Essar Oil and a non-binding pact to buy a 49% stake in the company, which is controlled by India’s billionaire Ruia brothers. As part of the deal, the Russian producer will supply 10mn metric tonnes of crude a year, or about 200,000 bpd, for Essar’s Vadinar refinery in the western state of Gujarat. It never specified where the crude would be sourced from.
Gupta declined to comment on when the deal could be finalised or on the value of Rosneft’s stake, saying the owners of the family-controlled company are in charge of negotiations with Rosneft.
Essar Oil, when it delisted from the Bombay Stock Exchange in December, had a market capitalisation of about 380bn rupees ($5.7bn).