Iran not obliged to award Farzad B to Indian firm

31 July 2017

Indian energy firm ONGC Videsh had made an $11bn offer to develop the gas field

Iran says it is not obligated to award its offshore Farzad B gas field to India’s oil and gas explorer ONGC Videsh, which discovered the block in 2012.

While ONGC had been allowed to undertake technical surveys on the offshore gas field, development rights were never part of the deal, said Asadollah Gharekhani, head of Iran’s parliament energy commission.

“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,” he said to local media.

ONGC had earlier made an offer to invest as much as $6bn on the Farzad B field as well as build a liquefied natural gas (LNG) facility, worth a total investment of $11bn.

However, talks between both sides have dragged on amid an increasing war of words. India threatened to cut crude imports, while the National Iranian Oil Company signed a preliminary agreement with Russian firm Gazprom to develop the field.

Gharekhani also dismissed the Indian threat to reduce imports saying Iran could find other customers for its crude.

Increasing gas output, as well as the development of LNG facilities, is part of Iran’s target to increase its global share of gas production.

The gas producer currently produces 0.1 of global output. It has plans to increase up to 10 per cent by 2025 as it looks to be a net exporter.

It presently consumes nearly all of the 202.4 billion cubic metres of gas produced in the country, with some additional supplies having been allocated for export to neighbours Iraq, Azerbaijan and Turkey through pipelines.

Iran is looking to prioritise production of LNG as increased production from South Pars comes on-stream. The country has no functioning LNG manufacturing facility, though France’s Total was rumoured to have shown interest in developing a facility at Tombak.

On 3 July, the National Iranian Oil Company signed a $4.8bn agreement with Total to develop phase 11 of South Pars - its first big foreign investment deal in the energy sector since nuclear sanctions were lifted last year.

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