Lowering of crude oil prices the likely outcome of the Iran nuclear deal will contribute positively to the Indian economy, across the oil and gas value chain barring domestic upstream players, said India Ratings and Research (Ind-Ra).
A decline in oil prices could lower LNG prices as the two are linked and this is likely to benefit end-consumer industries such as fertiliser and petrochemicals.
Oil refiners will benefit by way of lower crude oil prices as imports from Iran will be more cost effective than imports from Africa, Latin America and Venezuela among others. Post the agreement and lifting of sanctions on Iran, lower insurance and transportation costs are likely to reduce the overall landed cost of Iranian oil in India.
Domestic public sector upstream players may benefit from a lower subsidy burden if the quantum of under-recovery and hence subsidy declines. However, the benefit of lower subsidy could be offset by lower realisations that public sector units would face because of a decline in crude prices.
The lifting of sanctions could also help revive investments by ONGC Videsh Limited in Farzad-B gas field, which could entail investments of nearly $7 bn. Additionally at some stage, talks on the $4 bn Iran-India gas pipeline could restart.
India also had plans of buying 5mt of natural gas per year under a deal signed in 2005, between National Iranian Gas Export Company and India's Gas Authority, Indian Oil and Bharat Petroleum.
The resumption of these projects and deals will lead to higher supplies and lower prices which will benefit Indian corporates which rely on oil and natural gas.
Source:economictimes.indiatimes.com
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