Upset with the USD 5.5 billion master development plan submitted by ONGC Videsh Ltd - the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC) - Iran has signed an initial pact with Russia's Gazprom for developing Farzad-B gas field.
"We value relationships. During difficult days of Iran, when the entire west imposed sanctions, we stood by them and bought substantial amount of crude oil. We also returned every penny when the banking channels reopened," he said.
Now, Iran has to reciprocate. "We have that much expectation from Iran. I hope Iran will comply with that," he said. "Our relationship with Iran is not based on a single commodity or a single transaction."
With Tehran delaying the award of rights to develop the 12.5 trillion cubic feet gas field to its discoverer, OVL, India decided to cut oil imports from Iran by a fifth in 2017 -18.
Iran retaliated by first cutting by one-third the time it gave to Indian refiners to pay for oil they buy from it as also raising ship freight rates, and now by signing a memorandum of understanding (MoU) with Russian gas monopoly Gazprom.
The MoU was signed between Gazprom and National Iranian Oil Co (NIOC) in Kremlin on March 28 when Iranian President Hassan Rouhani met his Russian counterpart Vladimir Putin. The agreement spans Farzad-B, the North Pars and Kish fields.
Iran has been unhappy with the USD 5.5 billion investment plan of OVL as it will have to reimburse all of the money that is invested, together with a fixed rate of return. Tehran wants the investment to be lowered and OVL commit to buying gas at a price fixed by it.
OVL, on the other hand, says it will take up development only if the terms are economical and cannot absorb any cost and the price of gas should be comparable to rates in current market.
Sources said Indian refiners have cut oil imports from Iran by a fifth to 1,90,000 barrels per day (bpd) in 2017-18 from 2,40,000 bpd in the previous fiscal.
Iran, India's third biggest oil supplier, used to give a 90-day credit period to refiners like Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) to pay for the oil they would buy from it.
Now, Tehran has reduced this to 60 days, essentially meaning that IOC and MRPL would have to pay for the oil they buy from Iran in 60 days instead of previous liberal term of 90 days, they said.
Iran oil sale terms were the most attractive for Indian refiners. Besides a liberal credit period, it also shipped the oil to India for a nominal 20 per cent of normal ocean freight.
Other Middle-East sellers offer not more than 15-day credit period.
Sources said NIOC has also decided to cut the discount it offers to Indian buyers on freight from 80 per cent to about 60 per cent.
Since the lifting of western sanctions, Iran has played hardball over award of the field which was discovered by OVL.
The two nations were initially targeting concluding a deal on Farzad-B field development by November 2016 but later mutually agreed to push the timeline to February 2017.
Now, the deal is being targeted to be wrapped up by September after the two sides agree on a price and a rate of return for OVL's investments.
Farzad B was discovered by OVL in the Farsi block about 10 years ago. The project has so far cost the OVL-led consortium, which also includes Oil India Ltd and Indian Oil Corp (IOC), over USD 80 million.
The field in the Farsi block has an in-place gas reserve of 21.7 tcf, of which 12.5 tcf are recoverable.
New Delhi is keen that the gas from the field comes to India to feed the vast energy needs.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)