$10b Indian Proposal to Develop Gas Field

$10b Indian Proposal to Develop Gas Field$10b Indian Proposal to Develop Gas Field

ONGC Videsh Ltd, the overseas arm of India's state-owned Oil and Natural Gas Corp, has submitted a $10-billion integrated proposal to Iran for developing the Farzad-B Gas Field in the Persian Gulf and shipping the gas to India.

"In April, we met in Iran and as per discussions, we have worked out a fully integrated proposal and submitted to Iranian authorities," OVL Managing Director Narendra K Verma told reporters, Business Standard reported.

Verma said Iran had asked for a plan for developing the field as well as options for taking the gas.

"Fully integrated proposal with lots of options has been submitted," he said, adding that OVL has invited Iranian officials to India for discussions on the proposal.

A consortium of OVL, Oil India and Indian Oil Corp had discovered an estimated 363 million cubic meters of gas reserves in the Farsi block in 2008. The discovery was named Farzad-B.

Gas output from the field can either be converted into liquefied natural gas by freezing at subzero temperature and shipping in cryogenic ships to India or transported through a pipeline passing either overland through Pakistan or subsea.

Iran and six world powers reached a historic deal on July 14 in Vienna, Austria, that would limit the Persian Gulf country’s nuclear program in return for removing sanctions on its energy and financial industries, opening prospects of Indian investments in the Persian Gulf field.

Indian firms had so far shied away from investing in Iran for fear of being sanctioned by the US and Europe.

OVL in August and September 2010 submitted a revised Master Development Plan for producing 60% of the in-place gas reserves but had not signed the contract because of the US sanctions threat that targets any company investing more than $20 million in the Islamic Republic's energy sector in any 12-month period.

Iran's Ultimatum

In February 2012, Iran issued a one-month ultimatum to the OVL-led consortium over the development of a gas field.

For more than two years, it did not carry out the threat of cancelling allocation of the Farsi block to OVL.

To pressurize India to act, Tehran last year put the field on the list of blocks it wants to auction in future.

It has, however, not yet cancelled OVL's exploration license for the Farsi block, which gives it the right to develop the discoveries it has made.

Verma said since Indian companies had made the discovery, they naturally had the first right to develop them.

"They had asked for a development plan and as also a plan on how the gas produced is to be used ... We have submitted an integrated proposal to them," he added.

Iran, he said, has given a draft contractual regime under which Indian firms should operate. OVL and IOC reportedly hold 40% interest each in Farsi block.