Will Iran Participate in Chennai Petroleum?

While Iran is currently sitting on the world's fourth biggest oil reserve, Indian Oil maintains that the Middle Eastern nation has not ruled out taking part in the Chennai Petroleum expansion, which could give the project a major and much-needed boost.

Indian Oil is currently the country's biggest refiner, generating around US$63 billion in 2018. Now, chairman Sanjiv Singh has confirmed that the company is still in talks with Iran regarding participation in an upcoming expansion at Chennai Petroleum Corp Ltd, which currently refines around 20,000 barrels per day.

Indian and Iran on good terms

The comments come in the face of rumours that Iran had definitively pulled out of the deal after India slashed Iranian crude oil imports to conform with US sanctions. That said, the two countries appear to be on good terms, with India's finance ministry recently exempting rupee payments made to the National Iranian Oil Co (NIOC) from heavy taxes. This will allow Indian refiners to pay off around US$$1.5 billion of outstanding debts to NIOC and could also encourage Iran to invest in the Chennai Petroleum expansion.

“Iran has always been positive with this (the new rules). I think they should be able to invest,” Singh commented in a recent interview with Reuters.

Hossein Zamaninia, Iran's deputy oil minister for trade and international affairs, maintains that while India may be slowing down trade, the country has encountered no issues selling its oil.

"Despite U.S. pressures on Iranian oil market, the number of potential buyers of Iranian oil has significantly increased due to a competitive market, greed and pursuit of more profit," says Zamaninia.

Refinery expansion set to boost Indian output

If Iran does move forward with the investment, the cash injection will be used to replace the Nagapattinam refinery in Southern Tamil Nadu state, which currently churns out 20,000 bpd. It will be upgraded to a 180,000 bpd plant, which would provide a serious boost to Indian Oil's output. The project has an expected timeline of five to six years and will cost an estimated US$5 billion. There are also talks of building a petrochemicals plant with the capacity to process 475,000 tonnes per annum.

While India is heavily focussed on expanding its oil industry, other nations are concentrating on shale extractions. For a closer look at the complexities associated with the controversial industry don't miss 'A paradigm shift for shale: the environmental, financial, and litigative impetus for produced water recycling.'