India falters to gain foothold on oil(y) path

The overseas search in Russia, Iran has so far been unsuccessful.

India's search for energy security has taken its oil companies across the globe. The search overseas has, however, largely been unsuccessful in Russia and Iran, the two countries with the largest gas reserves in the world.

In both Russia and Iran, Indian companies are present in just one oil and gas acreage each. The Sakhalin I block in Russia, in which ONGC Videsh Ltd (OVL) holds a 20 per cent stake, is an oil- and gas producing block, while oil and gas have been discovered in the Farsi block in Iran, in which OVL, Oil India and Indian Oil Corporation (IOC) have stakes.

"Thats it. Everything else we have sought in the two countries has not met with success," said a top official of an oil company.

OVL got stake in the Sakhalin I project in 2001 while the contract for the Farsi block was signed in 2002. Since then, India has sought various other projects in the two countries without any success. 
 

IRAN, RUSSIA GAS PLANS STAGNATE Indian oil companies' E&P proposals in Iran
Company	Field
OVL	Jufeyr
OVL	Yadavaran
OVL-Hindujas	South Pars
OVL-IOC-OIL*	Farsi
*Oil and gas has been discovered
Other projects in Iran, Russia
Iran
Import of 5 mt of LNG	shelved
GAIL petrochem plant	held up
Gas through Iran-Pakistan-India pipeline	held up
Essar group's $2 bn refinery	held up
Tata Steel plant	held up
Russia
Stake in Sakhalin III	pending
LNG terminal in Sea of Okhotsk	pending
GAIL city gas projects	pending
Stake in gas company Rosneft	shelved
Loan to Rosneft	returned

This includes the $7.2-billion pipeline project from Iran to India, through Pakistan, that would have supplied almost 60 million cubic metres per day of gas to India. Another deal to import liquefied natural gas (LNG) from Iran fell through due to differences over gas pricing. OVL had sought stakes in three oil and gas fields in Iran, which have not yet been successful.

Gas utility GAIL India had planned to set up a petrochemical complex in the country, but Iran does not figure in the list of 10 countries where it plans to set up such a plant. Essar Oil's plans to set up a $2 billion crude oil refinery has also not moved forward, and neither has the Tata Steel's proposed plant there.

"The problem is purely politics. No business house can afford to ignore Iran, which has the gas that we need," said an analyst with a global advisory firm.

The US has urged India not to invest in the gas pipeline from Iran. The pipeline deal is now close to finalisation with Iran and Pakistan agreeing on the terms and conditions.

"Essar has dropped its refinery plans after its investment in Minnesota Steel, which is a US company," another Mumbai-based analyst said.

Politics has become such an overwhelming issue that officials refuse to talk about Iran. One top official with an oil company said he may lose his job if he spoke about Iran.

The government, however, claims it is has not dropped its Iran hopes. "We are looking to pick up the pieces of the Peace Pipeline (the Iran gas pipeline)," a senior petroleum ministry official said. "And OVL alongwith the Hindujas are looking to spend almost $10 billion there."

Diplomatically, however, the search for energy in the country has not taken off. As a top ONGC official said recently, "We will be the implementer. The Hindujas will be the enabler in Iran."

The industry points to the urgent need for energy. India imports nearly 73 per cent of its crude oil requirements, and gas supply in the country is currently half of the demand. This is when imports in the form of LNG makes up much of the gas availability.

Chinese aggression
The other major reason is China. "We have lost much to them in Russia, and now they are eyeing Iran," said another senior official of an oil company.

Iran recently signed an agreement with Chinese state-owned company Sinopec for development of the Yadavaran gas field and supply of 10 million tonnes of LNG a year for 25 years.

OVL had earlier signed a memorandum of understanding with Iran for a 10 per cent stake in the field. Iran and Malaysia have also signed a $16-billion agreement to develop two Iranian gas fields.

India now wants a stake in Sakhalin III. Russian President Vladimir Putin, during his visit to India last year, had promised to push India's case for a stake in the field. Russian company Rosneft late last year had signed a contract with Sinopec for jointly developing the field.

"Thats not the end of Sakhalin III though. India can still get a stake in the project," said a senior Russian official.

ONGC had late last year sent a team of geologists to study the prospectivity of the Sakhalin III project.

"The team has found that there is gas in the field, but the chances of oil are marginal at best," a senior ONGC official said. "The Chinese company, we are told, is not very interested in the field, and we may now get a stake," he concluded.