ONGC, Hindujas spar over stake in Iran gas field

ONGC feels Iran offered the stake to India because of its expertise and hence it deserves three-fourths of the share.

Oil and Natural Gas Corporation (ONGC) and Hinduja Group are at loggerheads over a stake in an Iranian gas field, with the London-based group seeking half of the 40 per cent interest assigned to India but the state-owned company willing to concede only one-fourth.

Hindujas want the stake in Phase-12 (SP-12) of the giant South Pars gas field to be split equally between its subsidiary Ashok Leyland Projects Services (ALPS) and ONGC Videsh (OVL), the overseas arm of ONGC, sources in know said.

The state-owned firm, however, feels Iran offered the stake to India because of its expertise in the business and so it deserved three-fourths of the stake on offer. ALPS has no experience in oil and gas exploration and production (E&P) and so should be confined to a smaller role, ONGC feels.

After years of tough negotiations, Iran last month signed agreements to give the ONGC-Hinduja combine a 40 per cent stake in SP-12. ONGC and ALPS, along with Petronet LNG, also signed a pact to buy 20 per cent stake in Iran LNG, that is building a $4.32-billion plant on the southern coast to convert gas from SP-12 into liquefied natural gas (LNG) for exports.

The division of the stake within the Indian group was to be decided internally, the source said. Hinduja also wants 10 per cent stake in the LNG plant and the balance to be split equally between ONGC and Petronet.

ONGC, on the other hand, is seeking a greater role even in LNG project.

Sources say ONGC feels Iran offered SP-12 to the Indian venture because of its success in discovering gas in the Farsi offshore block located in the eastern part of the Persian Gulf off the Iran coast near the Saudi border. OVL, along with Indian Oil and Oil India, will invest $5.5 billion in developing the Farzad-B gas field in the block.

Phase 12 is the largest of the 28 phases in which the South Pars gas field in the Persian Gulf has been divided and will cost $7.5 billion.

Petropars, a subsidiary of National Iranian Oil Co, would hold 40 per cent in SP-12 while the remaining 20 per cent would be with Sonangol of Angola.

Iran will also sell 6 million tonnes a year of LNG to India to meet its growing energy needs.

Sources say Iran does not give foreign firms ownership of oil and gas and instead pays a fixed fee on the investment made. Indians would, however, get LNG in return.

SP-12 is to produce 3 billion cubic feet per day of gas, two-thirds of which is to be converted into LNG for exports.

Gas from SP-12 would go to Iran LNG, which is building a $4.35 billion plant at Tombak Port by 2011, to turn it into liquid state so that it can be shipped in cryogenic vessels.

Phase 12 field is the southeastern block of the South Pars gas field and is on the border with Qatar and extends over 150 sq km. At 35 tcf, it contains almost 7 per cent of reserves in the South Pars gas field.