Iran’s Farzad oil gas block seen slipping away from India

KOLKATA (miningweekly.com) – India’s bid to develop Iran’s Farzad B oil and gas fields is seen to be slipping away as the nations failed to meet the October deadline for reaching an agreement on the development of the asset.

Even amid increased diplomatic engagements between the two countries over the past month and a rush of Western and Chinese investors eager to get in on the oil and gas development, Iran has made it clear that India’s commitment to put up $10-billion for the Farzad B asset is a case of too little too late, an Indian official involved in the bilateral negotiations has said.

The Indian government last month rushed a delegation to Tehran to salvage Indian interests in the Persian Gulf nation, after sanctions were lifted. However, following the Tehran visit, the only official Indian statement read, cryptically: “the two countries will continue to make efforts to conclude a definitive agreement by March 2017”.

In April 2016, the oil Ministers of the two countries had set October 31 as the deadline to complete all bilateral negotiations and conclude a sovereign agreement for development of the Farzad B asset.

According to an official involved in drafting notes for the bilateral talks on Farzad B, the Iranian government has made it clear that the financial proposal for the development is not acceptable. This is being interpreted as implying that the $10-billion committed by India might be sufficient to develop the asset, but not sufficient as a viable economic model for “allround economic and infrastructure” development of allied projects and services around the Farzad region – a model being aggressively pushed by rival oil and gas exploration investors from western developed economies and China, the official added.

The Indian side is also concerned over the lack of competitive muscle of its national oil and gas exploration and production majors like ONGC to take on increasing global competition in the Iranian sector.

It was pointed out that France’s Total, which was slated to lead the first of the western oil and gas majors’ forays into Iran, had been successful in striking up alliances with China National Petroleum Corporation and Petropas Iran, to re-enter the Persian Gulf nation as a consortium.

In comparison, single bids for investment by companies like ONGC would naturally be weaker competitors in offering attractive investment options to Iran, officials opine.

Quoting from reports in Iranian media, Indian officials said that the Iranian government had decided to give India-Iran bilateral talks on Farzad B a maximum of two more months, before the Iranian government would put the asset up for competitive bidding for global investors.

India was first awarded Farzad B for development in 2010 at the peak of western economic sanctions on Iran. However, subsequently, Iran pulled the plug and took back the asset planning to put it up for fresh bidding.

Last year, a group of Indian companies led by ONGC submitted a $10-billion investment plan to develop the estimated 12.8-trillion cubic foot offshore gas block on the Persian Gulf, on condition that the oil and gas block be allotted to India on a bilateral basis.