Iran acting tough on ONGC over development of gas field

Anticipating easing of Western sanctions against it, Iran is acting tough over giving state- owned ONGC the rights to develop the Farzad-B gas field in the Persian Gulf.

Apparently upset over India not committing to invest in the ONGC-discovered field when Iran was under sanctions, the Persian Gulf nation remained non-committal on giving rights of the field to ONGC Videsh Ltd when a high level Indian delegation visited Tehran last month, sources said.

While the Indian side insists it is engaged with Iran on the issue, Iran's semi-official Fars News Agency last week reported that Tehran has withdrawn the offer for Farzad-B.

"Tehran hasn't accepted the offer and has decided to withdraw its offer for the development of the country's Frazad B gas field to Indian contractors and plans to put out the project to tender," it reported citing unnamed Iranian Oil Ministry sources.

Indian officials, however, said they haven't heard anything from Tehran on the issue and the news report may be part of Iran's attempt to put pressure on ONGC to accept its terms. Tehran also wants India to raise oil imports.

"We continue to be engaged with Iran on the issue," an official said.

A delegation, headed by Ashutosh Jindal, Joint Secretary in Ministry of Petroleum and Natural Gas, held extensive talks with Iranian officials on development rights to the Farzad-B gas field in the Farsi block.

Iran had last month reached a framework nuclear agreement with the six world powers, spurring hopes of a final deal by June-end that could lead to the lifting of economic sanctions.

Indian firms have so far shied away from investing in Iran for the fear of being sanctioned by the US and Europe.

ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, had in 2008 discovered the Farzad-B gas field in its Farsi exploration block in the Persian Gulf.

In August/September 2010, it submitted a revised Master Development Plan (MDP) for producing 60 per cent of the 21.68 trillion cubic feet of in-place gas reserves but had not signed the contract because of threat of being sanctioned by the US which is against any company investing more than USD 20 million in Iran's energy sector in any 12-month period.

Iran, in February 2012, issued a one-month ultimatum to the OVL-led consortium over the development of a gas field.

For more than two years, it did not carry out the threat of cancelling allocation of the Farsi block to OVL.

To pressure India to act, Tehran last year put the field on the list of blocks it wants to auction in future, sources said, adding it has however not yet cancelled OVL's exploration licence for the Farsi block which gives it the right to develop the discoveries it has made.

OVL is the operator of the Farsi block that lies in the north of Qatar. It has 40 per cent interest in the 3,500 sq km block. State refiner Indian Oil Corp (IOC) too has 40 per cent stake, and the remaining 20 per cent is with Oil India(OIL).

The Farzad-B gas field may hold an estimated 21.68 Tcf of in-place reserves, of which 12.8 Tcf can be recovered. The reserves in Farzad-B are almost thrice the largest gas field in India.