State-owned ONGC Videsh Ltd (OVL) lost development rights for the Farzad-B giant gas field in Iran to Iranian Petropars Group. OVL owns 40 per cent participating interest (PI) in the block in which gas discovery was first made by a consortium led by ONGC.
Indian Oil Corporation too owns 40 per cent of PI, with Oil India holding the remaining 20 per cent PI in the block. Issues in negotiations between OVL and Iranian authorities as well as US sanctions led to the failure of multiple negotiations between the company and Iranian regulators to finalise a development plan.
“The National Iranian Oil Company (NIOC) has signed a contract worth $1.78 billion with Petropars Group for the development of Farzad-B Gas Field in the Persian Gulf,” the Iranian Oil Ministry’s official news service Shana reported.
The gas field, which has in-place reserves of about 651 billion cubic metres of gas reserves, is expected to record about 28 million metric standard cubic meters per day (MMSCMD) of production within five years. India’s total gas consumption in FY21 was about 166 MMSCMD.
Sources told The Indian Express that Tehran had told India in January 2020 that it would develop the Farzad-B Gas field on its own. It had, however, kept the door open for India to join later.
An official, privy to the discussions, said that “In January 2020, we were informed that in the immediate future, Iran would develop the field on its own and would like to involve India appropriately at a later stage.”
Experts noted that a loss of operating rights was key as it would mean that ONGC was largely out of the driver’s seat for an investment in which it was among the largest stakeholders.
“Typically when a large player like ONGC has a major participating interest, it is likely that they also get operating rights which allows then to enhance or cut production as required and coordinate their capital expenditure,” said an expert who did not wish to be quoted noting that while ONGC would still be consulted as a key stakeholder, the operations would be controlled by the Petropars group. The expert noted that an operator separate from the largest stakeholder could also lead to a lack of transparency and inefficiencies in procurement.
OVL had signed the exploration service contract for the block in 2002 and the block was deemed commercially viable in 2008 after a discovery of gas was made by a consortium of companies led by OVL. Differences between regulators and OVL on terms of development and international sanctions on Iran led to a development plan submitted by OVL in 2011 not being approved.
Negotiations were restarted with Iranian regulators in 2015, under a new integrated contract covering upstream and downstream including monetisation/ marketing of the processed gas but negotiation remained inconclusive. ONGC proposed a revised development plan in March 2017.
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