IOC may shelve Iran investment plans

Indian Oil Corporation's (IOC's) proposed $5.7-billion investment to set up an integrated LNG project in Iran is slated to be shelved with the validity of the 2004 agreement ending in October.

IOC had signed a memorandum with Petropars of Iran in 2004 for developing a gas field, setting up a facility to liquefy the gas and building a terminal for exporting liquefied natural gas (LNG). The agreement expires on October 31 with Tehran choosing not to respond to the Indian firm's proposal, company sources said.

IOC-Petropars had made a pre-proposal to obtain in-principle approval from National Iranian Oil Company (NIOC) for allocating blocks in one of the phases in the gigantic South Pars field and for setting up liquefaction facilities.

NIOC, however, said since the South Pars field had already been allocated, it would examine the possibility of allocating block to IOC-Petropars from the North Pars field.

For the due diligence of the North Pars field, IOC-Petropars was required to sign a confidentiality agreement with Pars Oil and Gas Company (POGC). A draft confidentiality agreement was jointly prepared by IOC and Petropars and forwarded to POGC in July 2006. POGC, however, did not respond, sources said.

IOC sent reminders and in June sought a meeting of the chief executives of NIOC and IOC, but Iran did not respond to any of the requests.

IOC needed around 12 trillion cubic feet gas for its 9 million tonnes per annum LNG project. The project comprised five parts, including a $2.2-billion upstream field development that was to be done through a joint venture between IOC and Petropars. IOC was to have 40 per cent stake in the JV with an investment of over Rs 4,000 crore.

The second stage of the LNG project entailed setting up a $1.8 billion liquefaction facility by another IOC-Petropars JV with 60 per cent IOC share and an investment of Rs 1,500 crore by the Indian refinery major.

The third stage involved a $800 million shipping project where IOC's share would be 50 per cent with an investment of Rs 550 crore. This will be taken up jointly with leading international shipping companies.

The fourth stage involved setting up a regasification facility in India at a cost of $600 million. The fifth and final stage included putting up a 500 km regasification LNG transportation pipeline at a cost of $300 million.