Iran puts ONGC discovered gas field on auction list

The country has put Farzad-B gas field on auction in a bid to pressure India to invest in a Persian Gulf gas field

In a bid to pressure India to invest in a Persian Gulf gas field, Iran has put ONGC- discovered Farzad-B gas field on a list of fields it plans to auction citing delays by the Indian firm in its development.

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% 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 $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.

Tehran has now put the field on the list of blocks it wants to auction in future, sources with direct knowledge of the development said.

It has however not yet cancelled OVL's exploration license for the Farsi block which gives it the right to develop the discoveries it has made.

Sources said inclusion of the block in the list of areas Iran wants to auction is an attempt to pressurise New Delhi into investing in the project.

In the past, Iran has threatened to cancel award of Farsi block to OVL over delays in signing of the Farzad-B gas field development contract. But Iran has not carried out those threat because it knows it cannot get any credible international oil company to invest until the western sanctions are eased.

While OVL cannot invest in developing in the gas field because of the US sanctions, it plans to Iran engaged and will make investments once sanctions are eased, they said.

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

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

The Indian consortia would get a fixed rate of return on the $5 billion it will invest on developing the Farzad-B gas field as Iranian law prohibits foreigners owning oil and gas resources. Foreign companies develop the fields through service contracts.