Indian Oil looking to set up $3-bn petrochem project in Iran: report

Indian Oil Corporation (IOC) will start building a $3 billion petrochemicals plant in Iran as the state-owned refiner seeks to expand into allied businesses to drive growth, reports quoting unidentified sources said.

IOC is reported to be proceeding with the 1 million-tonne-a-year project on the basis of assurances from the Iranian government on access to cheap natural gas feedstock, say reports.

While the information has not been corroborated by any source, the Indian government is eager to make strategic investments in Iran's infrastructure and oil sectors.

Iran has also wanted Prime Minister Narendra Modi's government to utilise investment opportunities in Iran in the changed circumstances, as years of sanctions on the Persian Gulf nation nears an end.

While Prime Minister Narendra Modi spoke of plans to make investments worth billions of dollars in Iran, which include refinery and rail projects, nothing has taken off until now.

Indian Oil, the biggest oil refiner in India, plans to spend $4.5 billion in the next few years to expand the business, according to its website.

A natural gas-fed petrochemicals plant will allow Indian Oil to diversify from its existing projects that use oil products from its own refineries, sources said.

Petrochemicals accounted for 4.4 per cent of the company's revenues in the year ended 31 March 2015, while this business accounted for almost 39 per cent of its operating income.

Indian Oil sees ''tremendous potential'' in the industry, chairman B. Ashok said in an interview published in its latest in-house newsletter.

Meanwhile, reports also said Iran and India are planning mutual energy investments, as Iranian foreign minister Mohammad Javad Zarif  said earlier this month in New Delhi, as the two have a long tradition of mutual cooperation.

Iran, once the second-biggest producer in the Organization of Petroleum Exporting Countries (Opec), has been reduced to a near-pariah nation by western and UN sanctions and now needs external support to revive its flagging economy and its once buoyant hydrocarbon industry.

Indian companies, however, will have to compete with state-run China's state-run energy giants besides global oil majors such as Royal Dutch Shell Plc and Total SA, if the nuclear deal between Iran and the West holds and sanctions are lifted.

Once the nuclear deal is in place, Iran wants to build up its oil economy and India hopes to be a major factor in the scheme of things.