India Sets Sight on $5b Farzad-B Gas Deal

India will draw 56 million cubic meters of gas per day.India will draw 56 million cubic meters of gas per day.

Iran and India will sign a contract worth $5 billion on developing the first phase of Farzad-B Gas Field in the Persian Gulf by the end of next month after 14 years of negotiations.

Ali Akbar Shabanpour, managing director of Pars Oil and Gas Company, made the statement after discussing the mega project's technical and financial details with a top delegation of ONGC Videsh Ltd—the overseas arm of India's state-owned Oil and Natural Gas Corporation—in a meeting in Tehran last week, Mehr News Agency reported.

"Most financial and technical differences were resolved during the last round of talks," he added, noting that the two sides agreed on signing a heads of agreement, a non-binding document outlining the main issues relevant to a tentative agreement, in the near future, yet it will only be enforceable when it is adopted into the main contract and subsequently agreed upon.

Asked about the contract's precise value, Shabanpour said a preliminary estimate suggests a likely ceiling of between $4.5 and $5 billion. Nonetheless, the total cost has not been determined yet.

"Indians will fully provide investment resources. However, the viability of the financial plan should ultimately be approved by the Oil Ministry prior to concluding the final deal."

On the amount of gas to be extracted from the field, he noted that an initial development plan called for extracting 30 million cubic meters of natural gas per day from the field, but Videsh has stipulated in its new proposal that it will draw 56 million cubic meters of gas per day.

"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," he said.

Farzad-B is estimated to hold more than 500 billion cubic meters of in-place gas reserves, of which 370 billion cubic meters are recoverable.

  Choosing an Iranian Partner

According to the official, the Indian enterprise must have an Iranian partner to be officially allowed to embark on the development venture.

Asked about the contribution of the other Indian companies, namely Oil India and Indian Oil Corp. which played a role in discovering the gas reserves in the Farsi Block in 2008 that was renamed Farzad-B, Shabanpour said, "ONGC Videsh Ltd is the only company whose representatives have been actively attending the talks."

Oil Minister Bijan Namdar Zanganeh described Farzad-B last year as the only Iranian project "promised" to a foreign contractor.

India has been pushing for the development rights of Farzad-B after Iran and the six world powers (the five permanent members of the United Nations Security Council plus Germany) reached an accord in July last year on temporarily limiting Tehran's nuclear program in exchange for some sanctions relief.

As a further sign of interest in working with Indians in Farzad-B project, Iran did not list the gas field among the 52 oil and natural gas projects introduced to international companies in a major conference in Tehran in 2015.