KOLKATA (miningweekly.com) – India’s plan to develop natural gas assets in Iran has been buried in the wake of the US administration’s withdrawal of exemption from sanctions for trade in crude and natural gas with the Persian Gulf nation.

A consortium, led by ONGC had held protracted negotiations with Iran since 2002 to develop the Farzad B offshore natural gas asset. However, financial institutions have made it clear that they will not risk funding the project for fears of being targeted under US secondary sanctions.

Nearly all of the issues raised between ONGC and the Iranian government during their protracted negotiations were settled in November of last year, around the same time the US announced fresh sanctions against Iran.

Leading global consultants, which were expected to be engaged by the consortium, have also communicated that they could not risk pursuing projects in Iran with the US administration making clear its intention of removing all crude oil and natural gas originating from Iran from global markets, government sources said.

India’s domestic lending institutions have also communicated that since they have exposure in ONGC projects in several parts of the world, participation in the Iranian project would risk these institutions being blacklisted by the US administration under sanctions against Iran.

While the exemption from sanctions granted to India and seven other countries for trade in oil and natural gas with Iran still provided a small window for ONGC to formally sign a deal for the development of the Farzad B asset, the latest move by the US has virtually scuttled the project, officials said.

The Iranian government had recently been in touch with ONGC seeking the expansion of the project parameters and the inclusion of the construction of two pipeline networks as additional investments. The Iranian government demanded a rapid conclusion of the transaction, warning that any further delay would prompt the Iranian government to seek alternative investments from Russia or China, the officials said.

ONGC originally submitted a $10-billion project proposal to develop the estimated 2.16-trillion cubic feet natural gas Farzad B fields, which was subsequently pruned to $3-billion, jettisoning ancillaries like a gas liquefaction plant and pipeline networks.