India imported 461,000 barrels per day (bpd) of oil from Iran in July—a 110 percent increase over the same period in 2015 and an increase of 21 percent over June imports, according to a Reuters report.
India needs oil to cater to its ever-increasing demand for gasoline and diesel for its booming vehicle sales, whereas, Iran is scrambling to increase its exports and recapture its lost market share post-sanctions.
It’s a perfect match benefiting both parties.
India and Iran bypassed the need to settle in U.S. dollars. During sanctions, India paid for the imports from Iran in Rupees, which was used by Iran to purchase Indian goods, benefiting both nations.
“Iran has prioritized expanding relations with those states that stood by its side when it was under sanctions,” Tehran-based political analyst Mostafa Khoshcheshm said on Iranian state television in May, reports Bloomberg.
Since the lifting of the sanctions, Iran has regained 80 percent of its market share lost during the sanction years. Iran exported 2.31 million bpd of oil in June 2016, which is close to its pre-sanction levels, and a 100 percent increase from December 2015, just before sanctions were lifted.
Iran has also laid out plans to increase its crude oil supply in the future. It has set an ambitious target to export 5.8 million barrels of crude and condensates by 2021.
“We are not very far away from our pre-sanctions peak and we will soon attain that share,” said Mohsen Ghamsari, NIOC’s director of international affairs in an interview in Tehran. “Our exports peak is above 4 million barrels a day, and we have plans for that and are waiting for the right conditions.”
Much to Iran’s delight, India is in the midst of a growth spurt, with Indian’s oil demand increasing 7.8 percent YoY in Q2 2016—the fastest growth since 2007, according to the oil ministry’s Petroleum Planning and Analysis Cell.
The International Energy Agency expects India to be the fastest-growing crude consumer in the world through 2040, with demand growth of 6 million barrels set to overtake the Chinese demand of 4.6 million barrels.
India currently imports 79 percent of its crude requirements, which is likely to surge to 90 percent in the next two decades, according to an India Tech-PwC report. Related: Post Coup: Gazprom Still Eager To Complete Turkish Stream
In order to improve its oil security, India plans to build its Strategic Petroleum Reserve (SPR) to hold 40 million barrels of oil in the first stage, which is equal to 10 days of its daily crude oil import of 4 million bpd.
Though the program is dwarfed by the massive 150 days of reserves held by the U.S. and 60 days of SPR held by China, reports suggest that India will eventually increase its SPR to 90 days.
"The new storage facilities could stimulate an increase in crude oil production from countries such as Iran which are ready to add new oil to an already over supplied market," said Luigi Bruzzone of shipping brokerage Banchero Costa (Bancosta).
India and Iran are also collaborating on a number of projects that are mutually beneficial to both nations. The Chabahar Port Project agreement is one such important project.
"This is a cornerstone project and will expand India's strategic partnership with Iran beyond a buyer-seller relationship, said Sumitha Narayanan Kutty, associate research fellow with the South Asia Programme at the Rajaratnam School of International Studies.
As the two nations continue to work with each other, we are likely to see higher Iranian exports to India in the future.
By Rakesh Upadhyay for Oilprice.com
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