India’s quest for building its energy security may see it continue to pursue investment opportunity in Farzad-B gas field in Iran even though ONGC Videsh Ltd (OVL) may not get to develop the block that it discovered over a decade ago.
Highly placed sources in the oil ministry said that Indian consortium including Indian Oil, Oil India and OVL, which bagged the exploration contract for Farzad-B in 2002, may remain invested in the upstream project as equity partners with other local and international entities even without operatorship or development rights. This, they said, will allow the consortium to get their share of gas to India at applicable rates decided by Iran.
Though the exploration contract signed by the Indian consortium expired in 2009, official sources said that a deal could be negotiated so that India has a presence in the field as equity investors.
Farzad-B, which was discovered by OVL in the Farsi block about 10 years ago, had in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 Tcf is believed to be recoverable. If India gets a share of this gas, it could reduce its dependence on expensive LNG.
Iran has been dilly dallying over grant of development right of Farzad B for few years now. Things have come to a standstill since US sanctions on Iran in 2018 with India also moving slowly on the matter.
Sources said that changes in geo political scenario in the Covid-19 world, which suggests that Iran is coming closer to China while proximity of India is growing towards US, may further spoil the deal to develop the field. In fact, information coming out from Iran now suggests that the country may offer it to a local entity rather than OVL. If Iran decides to offer equity holding in the project, Indian consortium’s claims would once again be considered.
“There are two issues to Farzad-B project. Iran may not be giving development rights to OVL but an Indian consortium continues to have part ownership of the block and would get its share of profit whosoever develops the project,” the source quoted earlier said. OVL-led consortium have invested close to $100 million in the project.
Farzad-B was discovered by OVL in the Farsi block about 10 years ago. India and Iran were initially targeting concluding a deal on Farzad-B field development by November 2016 but later mutually agreed to push the timeline to February 2017. The deadline to wrap up negotiations was later targeted for September 2017. But, with deal stuck over pricing of gas. Sanctions delayed the process thereafter and despite visits of ministers from both sides no agreement could be reached. OVL pushed for the deal with a sweetened offer that included investment of close to $11 billion. But that also did not break the ice and the project remains in limbo.