New Delhi: India is hopeful that its decision to continue to engage with Iran, disregarding Western sanctions aimed at stopping the Persian Gulf nation from developing nuclear weapons, will help it land lucrative oil deals in the country. On Thursday, negotiators at Lausanne in Switzerland reached an agreement that may result in lifting of trade restrictions on Iran that has crippled the country’s economy.

Once the sanctions are lifted, Iran is likely to open up its substantive hydrocarbon reserves to Indian companies which may also include production-sharing contracts as part of a payback.

An Indian consortium comprising ONGC Videsh Ltd (OVL), Indian Oil Corp. Ltd (IOC) and Oil India Ltd (OIL) won a bid for the Farsi block in 2002 from National Iranian Oil Co. (NIOC). Although the group does not have ownership rights, it was to be paid a 15% return on investment once it was awarded development rights for Farzad-B gas field in the offshore Farsi block.

“We have been negotiating the kind of remuneration we want for developing the block and terms of engagement. We have not gone out. We have discussed this during sanctions and have been waiting. We are confident that they will honour their commitment for Farsi. Everyone is flocking there," said N.K. Verma, managing director of OVL.

This comes amid reports that Iranian reserves are attracting Big Oil companies from the West such as Total SA, Eni SpA, BP and Royal Dutch Shell. India is also trying to strengthen its relations with the energy-rich regions of West Asia, Central Asia and the South Asian energy corridor.

“I am a very strong votary of India’s engagement with Iran. For India’s energy security, Iran is very important because it is endowed with both oil and gas which we require and geographically located nearer to us," said R.S. Butola, a former chairman and managing director of OVL. “The Iranians had offered a production-sharing contract and were very keen to get the agreement signed. Yes, while we have maintained the course, the question is have we met Iran’s expectations? The Indian government will have to build upon this relationship."

Iran has been working on a new contract arrangement to attract foreign investors to its hydrocarbon sector in the backdrop of US and EU sanctions over its nuclear programme. Mint reported on 3 June 2013 about the first such instance since the 1979 revolution that overthrew the monarchy in Iran.

“The Western firms have been engaging with Iran. The Chinese firms are the ones who have played the role of maximum engagement with Iran. But it will ultimately depend upon the government of Iran whether they will repeat the models or go by what works best for them," added Butola who also headed Indian Oil Corp.

OVL, the overseas arm of India’s largest state-owned explorer, is the operator of the block, in which it holds a 40% stake. IOC has an equal stake and the balance 20% is held by OIL. The 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 liquified natural gas terminal to transport the gas, is estimated to require an investment of $8-9 billion. The investment for exploration and production work will amount to around $5.5 billion.

“We have also maintained an office there all throughout this period and have continued with our relations with them. Our case is pending with the Iranian authorities wherein we have submitted our final development plan. They have declared that a new Iranian Petroleum Law is being promulgated," added OVL’s Verma.

In an attempt to continue its relationship with Iran, OVL didn’t participate in the shale gas and oil exploration projects in the US. OVL exited its only hydrocarbon asset in the US in 2003 before investing in Africa’s civil war-ravaged Sudan, fearing a US backlash. Curbs imposed by the West on Iran have affected crude oil sales by the country to India. Not only have the sanctions made it difficult to make payments, getting insurance for ships moving cargo to and from Iranian shores has also become difficult.

Spokespersons for NIOC, India’s ministries of external affairs and petroleum didn’t respond to queries emailed on Wednesday. Also, queries emailed to the spokespersons of IOC and OIL remained unanswered till press time.

Butola said that once Iran’s isolation ends, it will also open the door for other stalled proposals such as the one for buying 5 million tonnes per annum (mtpa) of liquefied natural gas. The deal was signed in 2005 between National Iranian Gas Export Co., or Nigec, and Indian companies GAIL (India) Ltd, Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd. Also, after India and the US signed a civil nuclear deal in 2008, several Iran-related Indian projects have either been put on hold or dropped.

India also decided to focus on the Turkmenistan-Afghanistan-Pakistan-India gas pipeline instead of the Iran-Pakistan-India pipeline project.

Prime Minister Narendra Modi’s government, which has made energy security and supply a top priority, has aimed for a 10% reduction of its energy imports by 2022 and a 50% cut by 2030.

India imports 77% of its energy needs. Its energy import bill of around $150 billion is expected to double to $300 billion by 2030.

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