New Delhi: A group of Indian firms may review its plans to develop the Farsi natural gas block in Iran, a country which is facing US economic sanctions.
“How can you ignore the US? We have to take a strategic view on the same (development phase) and have asked for a report which will be put up to our board. We have to have a level of comfort,” said an executive of Oil India Ltd, or OIL, who didn’t want to be identified.
Iran faces economic sanctions by the US and its allies over its nuclear programme, which the US suspects is aimed at developing nuclear weapons. Tehran, however, maintains its nuclear programme is meant for producing electricity.
Besides OIL, ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corp. of India Ltd, and Indian Oil Corp. Ltd (IOC) are members of the consortium. The Farsi block is estimated to have reserves of up to 21.68 trillion cubic feet (tcf), with recoverable reserves of around 12.8tcf. OVL is the operator in the Farsi block with a 40% stake. It had won the bid in 2002. The other stakeholders in the block are IOL and OIL, with 40% and 20% stakes, respectively.
“On the investment front, it is fine till the exploration phase but in the development phase, the investment profile goes for a huge jump,” the OIL executive said.
Developing the gas field, along with building a liquefied natural gas terminal to transport the gas, will require an investment of $8-9 billion. The investment for exploration and production work will amount to $4 billion. While the Indian consortium does not have ownership rights, they will be paid 15% rate of return on investments they make once they are awarded developmental rights.
OVL’s managing director R.S. Butola declined to comment. An IOC executive, who also didn’t want to be named due to the sensitive nature of the issue, said: “Whether one needs to go forward in the wake of US sanctions on Iran needs to be discussed among the partners.”
“The consortium is evaluating all possibilities and the concerns are to be considered by all partners,” a person aware of the development said on condition of anonymity. “However, the matter now vests with the Iranian authorities. It is for them to invite the consortium and discuss the contract for the development stage.”
A top petroleum and natural gas ministry official denied any US interference. “There is no international politics involved,” the official said, but declined being named.
A US embassy spokesperson declined to comment.