India may urge the US to take its flagship oil and gas explorer ONGC out of the category of “commercially active firms” in Iran prior to US President Barack Obama’s visit to New Delhi in January. Once a firm is classified as commercially active (which is a function of its investments in the strife-torn country), it runs the risk of being debarred from investment in other major markets, especially in North America.
ONGC’s overseas arm OVL has spent nearly $90 million in finding hydrocarbons in the Farzad B field in Iran’s Farsi block but signing of the final contract — which could have potentially led to investments of $3-5 billion — is hanging fire due to geopolitical issues. Ironically, while ONGC figures in the US’s list of commercially active firms in Iran, OVL does not.
“India wants the interest of its companies to be hassle free in Iran or in the US,” a senior government official told FE. With oil diplomacy one of the primary focus areas of the PM Narendra Modi-led government, petroleum minister Dharmendra Pradhan had sought external affairs minister Sushma Swaraj’s intervention to help resolve the situation. India’s request is already being taken up with the US, the official said.
India recognises sanctions imposed as per the UN charter. In the case with Iran, India has been unable to pay for crude oil imports in light of tightened US sanctions making it difficult to access US dollars for transactions. “Our stand is neither anti-Iran nor anti-US. We want to protect the commercial interest of our companies,” the official added.
The Farzad B field, estimated to have 21.68 trillion cubic feet (tcf) of gas reserves, was found by OVL, thanks to a 2008 preliminary pact with the Iranian authorities, but no formal contract to exploit resources has been signed till date. US sanctions on Iran prevented both sides from making any head way in commercial exploitation of the reserves, with each blaming the other for the delay.
OVL is the operator of Farsi block that hosts the Farzad B field with 40% stake, while Indian Oil has another 40% interest, with Oil India holding the remaining.
Post sanctions on the Islamic country by western powers for its alleged nuclear activities in 2012, India has drastically reduced imports from Iran and started buying more from suppliers such as Colombia, Mexico and Venezuela. In FY14, India bought 11 million tonne of crude from Iran and the volumes are likely to be the same this fiscal. In 2009-10, crude oil imports from Iran were to the tune of 21.20 million tonne, which was cut to 18.50 million tonne in 2010-11; 18.11 million tonne in 2011-12 and further dropped to 13.14 million tonne in 2012-13.
Pradhan is understood to be seeking the external affairs ministry’s intervention to help resolve several situations, including ensuring exclusion of ONGC by US from the category of those companies “commercially active” in the Iranian energy sector.