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Oil demand may grow 5% 2005/6: Aiyar

India would have to cut gas subsidies if it wanted to increase imports as oil cos at present refused to import LNG.

india Updated: Nov 21, 2005 11:54 IST

Indian oil demand growth could hit five per cent in the 2005-2006 financial year as the economy grows rapidly, Oil Minister Mani Shankar Aiyar said at a meeting of oil producers and consumers in Saudi Arabia.

"We could easily be up five per cent," Aiyar told journalists on Saturday.

Indian oil imports in the financial year to March 2005 totalled 100 million tonnes, he said.

Aiyar also said that delays in Iran to naming a new Oil Minister has not yet put back plans to get a framework agreement in place to build a gas pipeline from Iran through Pakistan to India by the end of the year.

However, if the new Iranian minister were not named soon, the agreement might have to wait until January, Aiyar said. Iran's President Mahmoud Ahmadinejad is making a third attempt to appoint a new oil minister after two failed efforts.

Analysts say the pipeline deal has also been jeopardised by India's decision to join the United States in September and vote to refer Iran's nuclear programme to the UN Security Council for possible sanctions.

Aiyar said India would have to cut gas subsidies if it wanted to increase imports as oil companies at present refused to import liquefied natural gas (LNG), as they could not recoup costs through domestic sales.

"We will have to do without or pay the price which is necessary," he said.


Aiyar said India was disappointed that Indian companies failed to make the shortlist of those chosen by Saudi Arabia as possible investors in a new refinery at the Saudi port of Yanbu.

He said India was still looking to invest in a refinery in the east of Saudi Arabia. India has made little headway with plans for Saudi Arabia to invest in an Indian refinery, he said.

"We had wanted to invest in Yanbu but weren't shortlisted," he said. "There has not been very much progress with Saudi Arabia with regards to formulating investment in India."

Aiyar said Total would have a role in the refinery project at Bhatinda in India's northern state of Punjab.

"We have gone ahead with Total who are coming in on this major Bhatinda refinery," he said. He did not elaborate on what Total's role would be in the plant.

India's Hindustan Petroleum Corp Ltd and BP Plc agreed in October to form an equal joint venture covering refining and marketing at Bhatinda, but HPCL sources said the two sides differed over the project's structure.

Aiyar said the Bhatinda refinery would supply both northern India and Pakistan with oil products.

First Published: Nov 21, 2005 11:45 IST