India, Iran talks on Farzad B gas fields near breaking point

KOLKATA (miningweekly.com) – The protracted negotiations between India and Iran on the Farzad B gasfields have come to a halt following a hardening of stance by both countries.

No top level talks between officials of India and Iran have been held since the expiry of the last deadline of February, but official written communications between relevant authorities of the two countries indicate that neither nation is willing to accede ground to arrive at an agreement.

On the contrary, while the Iranian government has clarified in a written communication that the Persian Gulf nation is not obligated to allocate the asset on a preferential basis to India, the latter in retaliation has started to prune crude oil imports from Iran, officials familiar with the development say.

The Indian government is reportedly taken aback by the Iranian government’s insistence to put up Farzad B for auction, after a consortium of Indian oil and gas exploration companies agreed to increase its development commitment to $11-billion to include capital expenditure on allied infrastructure and logistics.

The new investment plan, which was submitted to Iran last month, includes $6-billion for development of the gasfields, as well as $5-billion for a liquefied natural gas terminal and export facilities.

The Indian side has been pressing for a preferential allotment of Farzad B, in the Persian Gulf, pointing out that Indian exploration and production companies discovered the asset in 2008 and that India has been a steady buyer of Iranian crude even during the height of Western sanctions against that country.

However, Iranian government officials reportedly said that the country “would not sign any deal on Farzad B with India under any kind of threat”.

With a deal reaching the scuttling point, officials say that the Indian government has directed national oil refining-marketing companies to progressively reduce crude oil purchase contracts with Iranian national oil companies.

According to published research reports, India’s crude oil imports from Iran during July 2017 decreased by 16% month-on-month and by 20% year-on-year.

With no new talks on Farzad B scheduled by either side, a section of the Indian government involved in economic diplomacy is keeping a close watch on developing strain between the US and Iran.

With the Trump Administration announcing fresh sanctions on Iran and the Iranian President this week  threatening to pull out of its nuclear deal with western nations, Indian officials are hoping for a softening of stance of Iran in its economic ties with India.