3 Scenarios to Develop Farzad-B Gas Field

An official at the National Iranian Oil Company says Iran is mulling over three scenarios to develop Farzad-B, a large gas reservoir in the Persian Gulf.

"Parallel talks are being held with India's ONGC Videsh Ltd, Russia’s Gazprom, the country's fourth largest gas producer, and Iranian energy company Petropars Ltd," added Karim Zeibodi, the head of a special department at NIOC, that oversees the performance of reservoirs, Shana reported on Monday.

Stressing that no decision has been made yet, Zeibodi said, "Protracted negotiations with Indian energy officials have not yielded desirable results. Nonetheless, the two sides are still trying to settle financial and technical differences."

According to the official, NIOC has also opened talks with Russians over the field's expansion as the second option.

Reportedly, Iran has already signed two basic agreements with Gazprom over the development of North Pars and Kish gas fields in addition to the Farzad projects. The three ventures would give Gazprom a strong foothold in Iran’s gas industry if finalized.

Referring to the third option that is cooperation with a domestic firm, he noted that Petropars is conducting feasibility studies to develop the field with the help of an unnamed foreign partner.

"Petropars is also considering the proposal to inject the field's gas into Aghajari reservoirs in the oil-rich Khuzestan Province," Zeibodi said.

Rejecting speculations that NIOC has commissioned Petropars to complete the major initiative, the official noted that even if the proposal is approved by NIOC's technical committee, it would not necessarily mean that other options are off the table.

  Point of Contention

According to Bijan Namdar Zanganeh, the oil minister, Iran's Oil Ministry sent a letter to Indian officials last month about the Farzad-B gas project that has turned into a point of contention between the two countries in recent months.

"Recently no top-level negotiation has taken place between Iran and India [on Farzad-B gas field], but we have sent them a letter," Zanganeh said without elaborating on the details.

Zanganeh believes although ONGC Videsh Ltd is willing to spend as much as $11 billion to develop the field, just 10% of the field's revenue will be reaped by Iran in 25 years and that is definitely not appealing.

"Our first priority is to generate profits for the country and not to just expand the field," he said.

A consortium of Indian companies, headed by ONGC Videsh Ltd, discovered the Farzad-B gas deposit in the Persian Gulf in 2008 but was unable to develop the field after the US and UN imposed economic sanctions over Tehran's nuclear program.

Indians pushed for the field's development rights after last year's removal of sanctions, possibly with the mindset that they should have preference over other firms because they had discovered the field and also because India maintained its crude imports from Iran during sanctions.

"India had been previously assigned to conduct technical surveys on Farzad-B, but awarding the development rights to Indians was never part of the agreement," Asadollah Qarekhani, the rapporteur of Majlis Energy Commission, said last month.

India's Petroleum Minister Dharmendra Pradhan said in August that the country's state refiners will import less Iranian crude oil in 2017-18. The decision is widely seen as a direct response to Iran and India's disagreement over the Farzad-B project. According to Qarekhani, the ministry "has found alternative customers" for crude oil it sells to India and will select a contractor based on its national interests.