Iran had agreed to buy the gas produced from ONGC Videsh Ltd-discovered Farzad-B field in the Persian Gulf, but talks got stalled after the US reimposed sanctions against Tehran.
ONGC Videsh Ltd (OVL), the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), had in 2008 made a significant natural gas discovery in the Farsi offshore exploration block in the Persian Gulf, the company said in its latest annual report.
The discovery was named Farzad-B.
"Since April 2016, both sides negotiated to develop Farzad-B gas field under an integrated contract covering upstream and downstream including monetization/marketing of the processed gas, however, negotiations remained inconclusive," it said.
During 2018-19, the National Iranian Oil Company (NIOC) proposed the development of the gas field and "offtake of raw gas by NIOC at landfall point(s)," it said.
"However, due to imposition of US sanctions on Iran with effect from 5th November 2018, technical studies could not be concluded which is a precursor for commercial negotiations," OVL said.
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Any company investing in the Iranian oil field will attract US sanctions, crippling its ability to access the international financial system.
OVL has projects in 21 countries and cannot risk being cut off from international payment system.
The Exploration Service Contract (ESC) for the over 3,500 sq km Farsi block was signed on December 25, 2002. OVL holds 40 per cent stake and is the operator, while the remaining stake is held by Indian Oil Corp (40 per cent) and Oil India Ltd (20 per cent).
The exploration phase of the ESC expired on June 24, 2009.
"The Master Development Plan (MDP) of Farzad-B gas field was submitted in April 2011 to Iranian Offshore Oil Company (IOOC) the then designated authority by NIOC for development of Farzad-B gas field. Subsequently, the Development Service Contract (DSC) of Farzad-B Gas Field, though negotiated till November 2012, could not be finalized due to difficult terms in the DSC and international sanctions on Iran," the company said.
Since April 2015, negotiations restarted with Iranian Authorities to develop the Farzad-B gas field under a new, Iran Petroleum Contract (IPC).
OVL has so far invested Rs 161.2 crore in the block.
Company officials said Iran previously conditioned granting rights to develop the Farzad-B fields on Indian firms buying all of the gas produced at the imported-LNG equivalent rate.
This proposition, which involved an investment of USD 11 billion in first developing the field and then setting up a facility to convert it into liquid gas (liquefied natural gas or LNG) for shipping to India, was considered very expensive, they said.
Iran thereafter agreed to take delivery of all of the gas produced from Farzad-B offshore field at a landfall point in the Persian Gulf nation.
Farzad-B field has an in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 Tcf is believed to be recoverable.
India and Iran were initially targeting concluding a deal on Farzad-B field development by November 2016, but later mutually agreed to push the timeline to February 2017.
The deadline to wrap up negotiations was later targeted for September 2017. But, with the deal stuck over the pricing of gas, no new deadlines have been proposed.