KOLKATA (miningweekly.com) – US President Donald Trump’s tearing up the multilateral nuclear deal with Iran has thrown a new spanner in works of India’s protracted plans to develop Farzad B offshore gasfields along the Persian Gulf coast.

The consortium of Indian companies, led by national exploration and production (E&P) major ONGC, had embarked on “last mile negotiations” last month to clinch an agreement for the development of Farzad B. However, this week’s developments could either delay or scuttle plans, depending on whether the US government offers countries, including India a waiver from new sanctions or if it enforces secondary sanctions, officials in oil companies here said this week.

The official response from the Indian government on the US scrapping the so-called P5+1 nuclear deal with Iran, signed in 2015 under the Barack Obama administration, has been a cautious diplomatic tightrope walk, albeit in favour of maintaining the nuclear deal.

“India has always maintained that the Iranian nuclear issue should be resolved peacefully through dialogue and diplomacy by respecting Iran’s right to peaceful use of nuclear energy and also the international community’s strong interest in the exclusive peaceful nature of Iranian nuclear programme. All parties should engage constructively to address and resolve the issues that have arisen in respect of the Joint Comprehensive Plan of Action,” a statement from India’s External Affairs Ministry said in response to the US administration’s scrapping of the deal.

Officials pointed out that, the impact of new US sanctions against Iran could not yet be assessed as other western countries that form part of the P5+1 deal were unlikely to go along with the US pullout, at least not immediately. However, more importantly, in the case of the Farzad B project, the US administration’s talks of “secondary sanctions” would be the real threat for the project reaching implementation stage.

Under any proposed secondary sanctions, the US government could impose sanctions on companies doing business in Iran and thereby impinge Indian companies, like ONGC, from raising dollar denominated project finance from international financial markets, the officials said.

While the official stand of the government and Indian E&P companies was to wait and see how the situation unfolds, particularly the stand of other western countries on the nuclear deal, ONGC too is expected to wait a while after closing on a formal deal last month.

The Indian consortium led by ONGC had agreed last month to submit a new formal investment plan of around $4-billion for development of the estimated 22-trillion cubic feet reserve Farzad B offshore gas asset.

The project would be for development and production of natural gas from the Persian Gulf fields, with the entire production bought back by Iranian national oil and gas companies. However the new investment plan would be a much truncated earlier version proposed by India worth around $11-billion including upstream and downstream facilities like storage and re-gasification terminals and transportation infrastructure and a deal to ship part of the production back to India.

Any new sanctions by the US would seriously jeopardise Iran’s plans to buy back the entire gas production from Farzad B and remit payment to the Indian consortium as international banking channels for such remittances could be blocked in the wake of any new sanctions and thereby open up an altogether new risk profile for the project, officials added.