Prospects Pale for Iran-India Gas Field Deal

EghtesadOnline: The National Iranian Oil Company is taking steps to tender the Farzad-B Gas Field, Ali Kardor, chief executive officer of the National Iranian Oil Company said, dashing hopes for an agreement with Indians who have been pushing for the drilling rights of the coveted field in the Persian Gulf.

News ID: ۷۴۱۰۸۶

22 April 2017

“We are taking steps to offer several contracts under engineering, procurement, construction and financing (EPCF) model to develop the Farzad-B field,” Kardor was quoted as saying by ISNA on Friday.

It means the state-run company is willing to break down the Farzad-B project into several small-scale development projects. Kardor did not say  whether the EPCF contracts would be awarded to one or several companies.

He did say that an unnamed company is advising the NIOC on technical and financial terms of the contracts, Financial Tribune reported.

“Documents are being prepared and tenders will be held soon,” Kardor noted.

A consortium of Indian companies, headed by ONGC Videsh Ltd, the overseas investment arm of Indian explorer Oil and Natural Gas Corp, discovered Farzad-B in the Farsi offshore block in 2008. The consortium could not obtain permission to develop the gas field due to international economic sanctions imposed over the row on Tehran’s nuclear program.

Following the easing of sanctions in January 2016, the consortium resumed negotiations on Farzad-B and submitted a development proposal, but it was rejected by the NIOC because it was “one-sided and financially not viable.”

“We are open to negotiating with the Indians if they continue to show interest (in Farzad-B gas field) and take steps to resolve financial issues,” Kardor said.

--- Not Under Duress

This month, India’s state refiners said they would cut future oil imports from Iran in a clear response to the impasse over Farzad-B negotiations. The move led to the souring of bilateral ties and an exchange of barbs between Iranian and Indian officials.

An unnamed Indian oil source told Reuters this month that Iran is “playing hardball ... We don’t see any forward movement on Farzad-B, so we have reduced oil imports.”

Indian refiners have reportedly told the NIOC about their plans to cut oil imports by a fifth to 190,000 barrels per day from 240,000 bpd.

Oil Minister Bijan Namdar Zanganeh has officially said Iran “will not sign a contract under duress,” adding that India’s proposal is not profitable.

Reuters quoted an ONGC Videsh executive as saying on April 4 that the company has submitted a revised plan to develop the giant Farzad B gas block in Iran, but did not provide details.

The offshore field is estimated to hold more than 350 billion cubic meters of natural gas in place. International majors, including French energy giant Total and state-owned China National Petroleum Corporation, have reportedly shown interest in the field.

Under sanctions, Iran was banned from the global financial system, preventing the field’s development. India was one of the few countries supplying Iran with goods, devising a complex payment mechanism to help Tehran access non-sanctioned items including medicine.