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India looks to access 21.68 tcf of Iranian gas with new contract

ONGC Videsh spent nearly $90 million in finding hydrocarbons in the Farzad B field in the Farsi block.

New Delhi |
October 15, 2014 11:10:54 am
ONGC Videsh spent nearly  million in finding hydrocarbons in the Farzad B field in the Farsi block. (Reuters) ONGC Videsh spent nearly million in finding hydrocarbons in the Farzad B field in the Farsi block. (Reuters)

In a renewed effort to hold on to promising energy assets, New Delhi has offered Iran an integrated package for developing the Farzad B field in the West Asian country, which includes swapping gas from the field with other Iranian gas at Chabahar port and also laying pipeline for transportation of the surplus gas to India.

The Farzad B field, estimated to have 21.68 trillion cubic feet (tcf) of gas reserves, was found by ONGC Videsh (OVL), the overseas arm of oil and gas major ONGC, thanks to a 2008 preliminary pact with Iranian authorities, but no formal contract to exploit the resources has been signed till date. US sanctions on Iran prevented both sides from making any headway in commercial exploitation of the reserves, with each blaming the other for the delay.

With India offering a new package, Iran has now said that it would renegotiate the deal as per a new Iran Petroleum Contract (IPC), which is likely to be unveiled in November, according to official sources. Developing the Farzad B block in the Persian Gulf requires an investment of $3-5 billion.

Tehran hasn’t yet taken a call on India’s offer, sources said, adding that both the countries were, however, considering laying an undersea pipeline or revive the stalled Iran-Pakistan-India (IPI) pipeline.

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The head of the National Iranian Oil Company (NIOC), Roknodding Javadi, is understood to have told Indian officials that a “term sheet” will have to be signed, which would include time-frame, price, offtake arrangement and governing law.

However, the master development plan would be subject to the new IPC. Iran is clear the “earlier discussions were a closed file”.

According to industry watchers, the new IPC would be different from earlier service contracts and would provide long-term deals. This would go beyond exploration to commercial production phase. The operator would not be allowed to book reserves. The revised format may be similar to the one offered by Iraq, where operator gets a reimbursement on an agreed percentage of production value.

OVL spent nearly $90 million in finding hydrocarbons in the Farzad B field in the Farsi block. In September 2010, the Indian explorer had submitted an MDP for drilling up to 60% of the 21.68 tcf of gas. In 2013, then Iranian oil minister Rostam Qasemi, while visiting India, had told his Indian counterpart M Veerappa Moily that the production-sharing contract would be signed in 90 days, before later saying that the production-sharing contract model no more exists.

Iran also said that perhaps India is negotiating with different gas-prolific countries such as Qatar to get a good price and not very keen to invest in Farzad B fields that require huge investments. Iran is interested in using oil storage space in India, said the official. The first strategic crude oil reservoir at Visakhapatnam in Andhra Pradesh will be ready this fiscal.

OVL is the operator of the Farsi block that hosts the Farzad B field with a 40% stake, while Indian Oil has another 40% interest, with Oil India holding the remaining 20% stake.

Siddhartha P Saikia | The Financial Express

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