Buoyed by Iran’s historic nuclear accord with world powers to end sanctions, India will ask Tehran for rights to develop ONGC-discovered Farzad-B gas field in the Persian Gulf even as it prepares to pay USD 6.5 billion in past oil dues.
Indian firms have so far shied away from investing in Iran for the fear of being sanctioned by the US and Europe. The same was deterring New Delhi from claiming rights to invest nearly USD 7 billion in the biggest gas discovery ever made by an Indian firm abroad.
But with Iran and six world powers sealing an accord to curb the Islamic Republic’s nuclear programme in return for ending sanctions, India is making a renewed pitching for rights to develop 12.8 Trillion cubic feet of gas reserves ONGC Videsh Ltd had found in 2008.
“We have been in negotiations with Iran over development of Farzad-B gas field. Now that sanctions will ease, we expect Iran to give us the developmental rights,” OVL Managing Director Narendra K Verma told PTI here.
Also, the easing of sanctions would mean India can freely buy crude oil from Iran. Sanctions had meant that New Delhi could import no more than 9 million tonnes of oil this fiscal, the same volume it had shipped from Iran in 2013-15.
“We have just heard of the deal but we have not seen any details of when the sanctions will be lifted. We are awaiting more details to decide on crude purchases,” a top official with a refiner which buys Iranian oil said.
An oil ministry official said lifting of sanctions would also mean oil refiners will have to clear US dollar 6.5 billion in past dues on purchase of Iranian oil.
Since February 2013, Indian refiners like Essar Oil and Mangalore Refinery and Petrochemicals (MRPL) have been paying in rupees to UCO Bank 45 per cent of their payment due on purchase of crude oil from Iran. The remaining has been accumulating, pending finalisation of a payment mechanism.
They had last year paid nearly USD 3 billion in six installments through a limited payment channel following start of nuclear talks between the West and Iran. The outstanding has since climbed to nearly USD 6.5 billion. Of this, Essar Oil owes about USD 3.5 billion and MRPL USD 2.5 billion. The rest USD 500 million is to be paid by Indian Oil Corp (IOC).
The official said the government expects that payment channels to open soon and Iran making a demand for clearing of past dues.
The historic nuclear deal struck today, sanctions imposed by the United States, European Union and United Nations would be lifted in return for Iran agreeing long-term curbs on a nuclear programme.
If approved by the US Congress, it would enable the holder of the world’s fourth-biggest crude reserves to ramp up energy exports with the easing of international sanctions on exports in return for curbs on its nuclear programme.
The official hoped Iran will not toughen its stand on rights of Farzad-B gas field anticipating it can get competing offers from elsewhere in the world including from China.
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, had in 2008 discovered the Farzad-B gas field in its Farsi exploration block in the Persian Gulf.
In August/September 2010, it submitted a revised Master Development Plan (MDP) for producing 60 per cent of the 21.68 trillion cubic feet of in-place gas reserves but had not signed the contract because of threat of being sanctioned by the US which is against any company investing more than USD 20 million in Iran’s energy sector in any 12-month period.
Iran, in February 2012, issued a one-month ultimatum to the OVL-led consortium over the development of a gas field.
For more than two years, it did not carry out the threat of cancelling allocation of the Farsi block to OVL.
To pressure India to act, Tehran last year put the field on the list of blocks to be auctioned in future, sources said, adding it has however not yet cancelled OVL’s exploration licence for the Farsi block which gives it the right to develop the discoveries it has made.
OVL is the operator of the Farsi block that lies in the north of Qatar. It has 40 per cent interest in the 3,500 sq km block. State refiner Indian Oil Corp (IOC) too has 40 per cent stake, and the remaining 20 per cent is with Oil India (OIL).
The Farzad-B gas field may hold an estimated 21.68 Tcf of in-place reserves, of which 12.8 Tcf can be recovered. The reserves in Farzad-B are almost thrice the largest gas field in India.
Since July 2011, India has been paying in euros for 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45 per cent was remitted in rupees through UCO Bank.
But in February 2013, when the US blocked all payment channels, Indian refiners paid Iran only the 45 per cent of oil bill in rupees through UCO Bank. The remaining 55 per cent in foreign currency has been held up with the refiners for lack of an approved payment channel.
In June/July 2014, refiners cleared USD 1.65 billion of past dues in three equal installments. Another USD 1.3 billion was paid in October/November in three installments.