New Delhi: India has nudged Iran to quickly award rights to develop the coveted Farzad-B gas field in the Persian Gulf to Oil and Natural Gas Corporation (ONGC) Videsh Ltd (OVL) by wrapping up negotiations that have been dragging on for months.
Oil minister Dharmendra Pradhan met Iranian foreign minister Mohammad Javad Zarif on Saturday to press for award of rights to develop the field, which was discovered by OVL, at the earliest.
“Our relationship is much more than a usual (bilateral) relationship," Pradhan said. “We stood by them (Iran) in their difficult times (US and western sanctions) and continued to buy oil from them."
He said he reminded the visiting minister of Iran’s commitment to awarding the field development to OVL on nomination basis. “I hope they will complete the process within the agreed time-frame," he added.
In October, the two nations had pushed back the timelines for concluding a deal on Farzad-B field to February from November agreed previously. “Let me just say that I am hopeful of concluding the deal within the agreed time-frame," Pradhan said when asked if Iran would awarded the field to OVL within this fiscal.
Iran is reportedly unhappy with the $10 billion plan submitted by OVL, the overseas arm of state-owned ONGC, for development of the 12.5 trillion cubic feet reserves in Farzad-B field and an accompanying plant to liquefy the gas for transportation in ships.
It feels the $5 billion cost OVL and its partners have put for developing the field is on the higher side and wants it to be reduced. OVL will earn a fixed rate of return and get to recover all the investment it has made in the field development. India, however, feels that Iran is not making the right comparison by comparing it with South Pars field development.
Farzad-B field is more complex than South Pars and has high sulphur, whose production and handling cost is additional.
The field in the Farsi block was discovered by an Indian consortium led by OVL in 2008. It has an in-place gas reserve of 21.7 trillion cubic feet (tcf) of which 12.5 tcf are recoverable. But India initially felt deterred from investing because of the fear of sanctions imposed by the US. But with the lifting of sanctions this year, it is back discussing a master development plan involving investment of $5 billion in field development and an equal amount in an liquefied natural gas (LNG) plant.
OVL is preparing a Master Development Plan for the gas field while also working on a gas pricing formula keeping in view of the global gas price scenario, people with knowledge of the matter said. Gas produced from the field can either be converted into LNG by freezing at sub-zero temperature and shipping in cryogenic ships to India or transported through a pipeline—via overland passing through Pakistan or sub-sea.
Iran and six world powers in July last year sealed a deal to curb the Islamic Republic’s nuclear programme in return for ending sanctions, opening prospects of Indian investments in the Persian Gulf field. The sanctions were lifted in January this year.