India Awaiting Iran's Farzad-B Decision

ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, on Monday said it has not heard from Iran on the $11 billion "best offer" it gave for developing the Farzad-B gas field.

“We are ready to invest provided we get reasonable returns,” OVL Managing Director Narendra K. Verma told reporters in New Delhi, Live Mint reported.

"OVL has offered to invest about $5.8 billion in developing the Farzad-B gas field and another $5 billion to build a liquefied natural gas export facility."

Iran wants a high price for the natural gas which, according to the Indian firm, makes the investment unviable.

“We will get the project the day we accept their conditions. But for me to go ahead and make such investments, it has to bring reasonable returns and make economic sense,” he said without elaborating.

Iran signed an initial agreement with Russia’s Gazprom earlier this year for developing the OVL-discovered gas field of Farzad-B, but has kept the door open for awarding it to the Indian firm.

“We have given them our best offer. Now, it is up to them to agree or not agree,” Verma said. With Tehran delaying the award of rights to ONGC Videsh to tap into some 500 billion cubic meters of in-place gas reserves, India decided to cut oil imports from Iran by a fifth in 2017-18.

Iran retaliated by first cutting by one-third the time it gave to Indian refiners to pay for oil they buy from it while raising ship freight rates, and then by signing a memorandum of understanding with Russian gas monopoly Gazprom.

New Delhi is keen that the gas from the field comes to India to feed the vast energy needs.

Iran, India’s third biggest oil supplier, used to give a 90-day credit period to refiners like Indian Oil Corp. and Mangalore Refinery and Petrochemicals Ltd to pay for the oil they would buy from it.

Now, Tehran has reduced it to 60 days, essentially meaning that IOC and MRPL would have to pay for the oil they buy from Iran in 60 days instead of the previously 90 days, the people said.

Iran oil sale terms were the most attractive for Indian refiners.

The people also said NIOC has also decided to cut the discount it offers to Indian buyers on freight from 80% to about 60%.