Eight years on, Farsi block development plan yet to be finalized

Eight years on, Farsi block development plan yet to befinalized

New Delhi: A master development plan (MDP) for Iran’s Farsi natural gas block hasn’t been finalized even eight years after a group of Indian companies won a bid to explore it, leaving the future of the project in uncertainty amid the threat of US economic sanctions against Iran.

Oil and Natural Gas Corp. Ltd’s (ONGC) overseas arm ONGC Videsh Ltd, or OVL, which won the bid in 2002, is the operator of the Farsi block with a 40% stake in the block. Indian Oil Corp. Ltd (IOC) and Oil India Ltd (OIL) have 40% and 20% stakes, respectively.

The consortium submitted a feasibility report to National Iranian Oil Co. (NIOC) in November 2008. NIOC then accepted the commercial viability of natural gas production at Farsi block.

“The MDP has been submitted to Iran and has still not been finalized. We have had a few discussions but are yet to hear on it. The project looks difficult to execute and the status quo is (being) maintained," said a senior OIL executive, who did not want to be identified because of the sensitive nature of the issue.

“We are trying to sort out the problems," said a senior IOC executive, who also did not want to be identified.

The Farsi block is estimated to have reserves of up to 21.68 trillion cu. ft (tcf), with recoverable reserves of around 12.8 tcf. Developing the gas field, together with the construction of a liquefied natural gas terminal to transport the gas, was estimated to require an investment of $8-9 billion (approximately Rs35,000-40,000 crore).

The investment for exploration and production work will amount to around $5.5 billion. While the Indian consortium does not have ownership rights, its members will be paid a 15% return on investment they make once they are awarded development rights.

Interestingly, NIOC had asked for a meeting with the Indian consortium in March, but the meeting was delayed with the Indian consortium citing requirement of additional information. The last meeting on the Farsi block was held with Iran in December 2009.

While India’s petroleum and natural gas ministry has denied any US interference, Iran has in the past accused India of delaying the final decision on developing its Farsi gas block because of pressure from the US.

R.S. Butola, managing director, OVL, said it was for Iran to formally approve the MDP and maintained that the consortium was still interested in the project.

“We have submitted the plan. People have been discussing the project. The Iranians are internally reviewing it. It is for them to formally approve it. I don’t think it is stuck for a good reason. Things like these take some time. We along with our partners are very much present there," Butola said.

While NIOC could not be contacted, questions emailed to the embassy of Iran in New Delhi, and Vishnu Prakash, spokesman for India’s ministry of external affairs, remained unanswered till the time of going to press.

The US embassy in New Delhi declined comment.

Iran has the world’s second largest oil and natural gas reserves. While India and the US have signed a civilian nuclear agreement in 2008, several Iran-related Indian projects have either been put on hold or dropped.