ONGC Videsh may decide on investment plans in Iran after India-US meet

ONGC Videsh is likely to decide on its investment plans in Iran after the upcoming ‘two-plus-two’ bilateral meeting between the foreign and defence ministers of India and the United States. 

This comes soon after the overseas subsidiary of Oil and Natural Gas Corporation pruned its $11 billion investment plans by shelving the proposed $6.2 billion liquefied natural gas export facility in Iran. 

“Now, we are only looking at Farzad B block, the fate of which will be decided only after the two-plus-two meeting. So far, there is no direction from the government,” said an official source. On July 6, external affairs minister Sushma Swaraj and defence minister Nirmala Sitharaman are set to meet US secretary of State Mike Pompeo and defence secretary Jim Mattis in Washington. The meeting was decided after Prime Minister Narendra Modi and US President Donald Trump met last year. 

Even with fresh US sanctions (for Iran) in place, India may not like to be out of the project as it has in place gas reserve of 21.7 trillion cubic feet (tcf), of which 12.5 tcf is recoverable. 

The contract for the block was signed on December 25, 2002, by the consortium consisting of ONGC Videsh, Indian Oil Corporation and Oil India for carrying out exploration in the Farsi offshore block. The contract had expired in June 2009, after the block was declared commercial based on the gas discovery at Farzad-B gas field. 

The main contention between India and Iran is on the rate of returns. When sanctions were lifted, Iran had signed an initial pact with Russia's Gazprom for developing Farzad B after no headway on talks with India was made. “Now, our investment plans for the block has also come down from $5.5 billion to between $3 and 4 billion,” the official added. 

Iran has also agreed to take the entire gas produced from Farzad-B offshore field to a landfall point. The gas from Farzad-B contains a high degree of sulphur. “It contains around 22 per cent impurities. Moreover, there will be no condensate that can be seen as an additional revenue. Instead, it will be dry gas,” he added. 

Last month, the US state department had asked all the buyers of Iran oil to stop imports by November. Following this, India reportedly asked its refiners to look for alternative sources, even though it did not recognise unilateral sanctions by the US. Industry sources are of the opinion that India should not follow this as countries like China, Russia, Turkey and Japan are continuing to buy Iran crude. 

“It is the requirement of refineries and refiners, depending on their complexity and refinery configuration, to procure the crude. They can acquire similar crude from available anywhere in the world at a competitive rate,” said a government official.