KOLKATA (miningweekly.com) – India and Iran are closing in on a deal for the development of the Farzad B gasfield, albeit of a much smaller size.
Diplomatic negotiations between the two countries since early this year have narrowed down differences on the gas project and this will be followed up by a consortium of Indian national oil, gas exploration and production (E&P) companies submitting a new investment plan within the next few months, officials familiar with the talks said.
It is learnt that the consortium lead E&P major ONGC would submit a formal investment plan of about $4-billion for development of the 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 greatly truncated version than the one proposed by India worth about $11-billion, which had included upstream and downstream facilities like storage and re-gassification terminals, transportation infrastructure and a deal to ship part of the production back to India, the officials said.
Sources said that the Iranian government had officially communicated to the Indian consortium its willingness to lift the entire production of unprocessed gas at the nearest delivery point and the revised Indian investment, hence, would be based on the price offered instead of costs of shipping it back to India.
The Farzad B fields are estimated to have reserves of 22-trillion cubic feet, of which 16-trillion cubic feet is the estimated recoverable reserves.
Even a deal smaller in size is expected to ease the growing trade tensions between the two countries. With India’s participation in Farzad B unravelling and the Iranian government inviting bids for its development, India’s subtle retaliation was a form of lowering the import of crude oil from the West Asian nation. This, however, has been contradicted by Iranian news agency, Tasnim, which reported that India imported about 700 000 bbl/d during the current month which was ‘unprecedented’.
With the international crude price breaching the $70/bl mark, it was in India’s interest to ensure sustained imports from Iran, the second biggest supplier. Sources indicate that the latter is even willing to offer a price discount on crude oil, to sweeten a deal on Farzad B and to have a cooling impact on the domestic price of oil for India.
For the Iranian government, maintaining growing trade ties with India will be an important signal to the international community as pressures are mounting on a new Iranian nuclear deal, led by the US government, officials here observed.