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ONGC Videsh Ltd has shelved plans to build a $5 billion LNG export facility in Iran and has instead opted to only invest in developing a giant gas field in the Persian Gulf, for which a revised cost is being worked out, an official said.
OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), had last year made its 'best' offer to spend $11 billion in developing the Farzad-B field in the Persian Gulf as well as in building the infrastructure to export the gas but Iran deterred on awarding the rights of the field to the Indian firm owing to differences over investments and price of gas.
The company has now agreed to do just the upstream field development part, leaving the marketing of the fuel to Iran, the official said.
As had been agreed during the visit of Iranian President Hassam Rouhani earlier this month, a team of OVL officials will be visiting Tehran this week to discuss modalities of the upstream development.
"We had initially thought that the upstream field development would cost USD 6.2 billion. But, this is not the final cost. We will be able to arrive at a final cost only after we do at least well to appraise the discovery we had made about a decade back," he said.
Only after the appraisal well is drilled and data analysed to see the extent of the field and recoverable reserves can a final cost be put, he said, adding that OVL would put forth the idea of being allowed to drill an appraisal well on the field.
The appraisal well, he said, may take 9-10 months to be drilled and completed.
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 $80 million.
The field has an in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 Tcf are believed to be recoverable.
The official said the field as high sulphur content and separate facility would be needed to separate gas from it. Costs of these facilities can be established only after appraisal well is drilled.
In the master development plan OVL submitted to Iran last year, it estimated the upstream part to cost USD 6.2 billion while another USD 5 billion will be required to build a liquefied natural gas (LNG) export facility.
While Iran believes the upstream investment should not be more than USD 5.5 billion, it wanted India to buy all of the natural gas produced from the Persian Gulf block at a price equivalent to the rate Qatar charges for selling LNG to India under a long-term deal.
Qatar, as per a revised formula agreed upon in December 2015, sells 7.5 million tonnes a year of LNG to Petronet LNG Ltd -- India's biggest gas importer -- at a price of USD 7-plus per million British thermal unit.
The rate being sought by Iran was triple of USD 2.3 per mmBtu rate OVL is willing to pay for the gas during low global oil prices. If global rates rise, OVL was willing to pay USD 4.3 per mmBtu, the official said.
OVL, he said, was willing to negotiate on the upstream cost but wants Iran to take up the marketing of the fuel, including building of LNG terminal, if it believes it can get a better price for the natural gas elsewhere.
India and Iran 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. The deadline to wrap up negotiations later targeted for September 2017. But, with deal stuck over pricing of gas, no new deadlines have been proposed.
Last year, India cut Iranian crude oil imports by about a quarter to 18.5 million tonnes in 2017-18 fiscal to put pressure on Tehran to quickly wrap up negotiations. It has so far not finalised the volumes it will buy in 2018-19 fiscal.
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First Published: Sun, February 25 2018. 14:10 IST