Farzad B gas field: Not obligated to give contract to India, says Iran

India has cut oil imports from Iran by a fifth, Iran responded by reducing time given for payments

The battle between India and Iran over Farzad B block has further intensified. Iran is now coming out with fresh statement that it is under “no obligation” to award the contract to India.  

This is despite a consortium of Indian companies led by ONGC Videsh Ltd (OVL) coming out with a $11 billion development plan last month, seeking a reasonable return of 18 per cent. Recently, Iran has signed an initial pact with Russia's Gazprom for developing Farzad B, discovered by ONGC. 

According to reports, in return to this, India has cut oil imports from Iran by a fifth this financial year. Iran also acted tough by cutting the time given to Indian refiners for oil payments by one third.

Talking about Iran signing an initial pact with Russia's Gazprom for developing Farzad-B gas field, Petroleum minister Dharmendra Pradhan had told Business Standard, "We don’t mind if the field goes to Gazprom. Our relationship with Iran is not based on a single commodity or a single transaction. We want viability for our investments.”

Though India had shown its interest in the project long back, it got delayed due to sanctions by the United States and other Western Countries on Iran. However, the latest statement by Iran seems to have worsened the relationship. "In the past, it was decided that Iran and India jointly carry out (feasibility) studies on the Farzad B oil field. The studies have been conducted and have finished. However, no decision was made that would suggest the project to develop the field should necessarily be contracted out to India," Asadollah Gharekhani, an Iranian lawmaker told the state-run ICANA news agency, according to a Times of India report.

Farzad-B has gas reserves of about 21.6 trillion cubic feet. Managing director of Pars Oil and Gas Company (POGC) — which is in charge of the project— Mohammad Meshkinfam had also told the Iran media that deemed ‘economic development model’ is the main basis of disagreement between both the countries. “In case no agreement is reached in the envisaged time, the development of Farzad-B will be put out to an international tender,” he had reportedly said.

The contract for the Block was signed on December 25, 2002 by the consortium consisting of ONGC Videsh, Indian Oil Corporation and Oil India for carrying out exploration in the Farsi offshore block. The contract had expired in June, 2009, after declaration of commerciality of the block based on the gas discovery of Farzad-B gas field.