Getting access to the Farzad B assets is vital for OVL to achieve the milestone of producing 20 million tonnes of oil and equivalent (mtoe) by 2018.
Energy-deficit India, which imported $125 billion worth of crude oil and products in FY15, wants to secure a hydrocarbon production contract in Iran to monetise the potentially prolific Farzad B gas field but Tehran, soon to be rid of Western sanctions, won’t relent. A team lead by joint secretary in petroleum ministry Ashutosh Jindal visited Tehran recently to persuade the Hassan Rouhani-led government to give state-run ONGC Videsh (OVL) the contract for developing the predominantly gas field, discovered by the Indian firm in late 2012.
But Iran, which expects Western sanctions to be suspended soon and eventually end, wants to auction the field rather than give it to the Indian explorer. Iran is clear that “earlier discussions (with OVL) were a closed file”. Iran is also peeved at India negotiating with other countries such as Qatar to import gas at competitive prices, which, it believes, indicated New Delhi’s lack of commitment to make huge investments in Farzad B fields.
“We have started negotiations (with Iran) since OVL discovered the gas field. However, Iran has decided to auction the asset as, according to them, India did not make any efforts in the past three years to sign the contract,” an Indian official who visited Tehran told FE. “The talks are continuing,” he added.
To convince Iran of its commitment to the project, sources said, India is also willing to offer Iran an integrated package to develop the field, which includes swapping gas from the field with other Iranian gas at Chabahar port and also laying a pipeline for transportation of the surplus gas to India.
Getting access to the Farzad B assets is vital for OVL to achieve the milestone of producing 20 million tonnes of oil and equivalent (mtoe) by 2018. In FY15, the firm’s output increased by 5% to 8.78 mtoe, against 8.36 mtoe in FY14.
“The Modi government is taking proactive steps to secure energy assets overseas. This comes along with preparing a war chest to bag the contract. The government is engaging in a one-on-one dialogues with countries with energy assets and is also promoting the domestic energy firms to form consortia for their overseas ventures, emulating the model followed by China, Korea and Japan,” said Gaurav Moda, head (oil and gas practice) at KPMG in India. “These endeavours by government would certainly help gain access to hydrocarbon resources overseas,” Moda added.
The Farzad B field, estimated to have 21.68 trillion cubic feet of gas reserves, was discovered by OVL in 2012, 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.
Post sanctions on the Islamic country by Western powers for its alleged nuclear activities in 2012, India has drastically cut its imports from Iran and started buying more from other suppliers such as Colombia, Mexico and Venezuela. In FY14, India bought 11 million tonnes of crude oil from Iran and similar volumes were imported in FY15. In 2009-10, crude oil imports from Iran were to the tune of 21.20 million tonnes, which was reduced to 18.50 million tonnes in 2010-11, 18.11 million tonnes in 2011-12 and further to 13.14 million tonnes in 2012-13.