ONGC Videsh Ltd’s (OVL) prospects to develop the Farzad B gasfield in Iran, which is estimated to hold 18.75 trillion cubic feet (tcf) of in-place reserves, appear to be slipping away with Tehran warning to call global bids after March. Senior officials of OVL recently visited the Islamic nation to discuss the development plan for the field and the gas price formula keeping in view the global price scenario, sources said. However, they said Iran was not satisfied with the OVL-led consortium’s proposal and had given time till March-end to come up with a fresh offer. Iran has said it can call a global bidding if it finds OVL’s proposal unsatisfactory even then.
OVL officials are expected to visit Tehran in the next two weeks to discuss Iran’s concerns and come up with an alternative plan. Analysts said this was not the first time that Iran had warned of calling global bids for the field. However, with several global players keen to exploit oil and gasfields in the Islamic nation following the lifting of sanctions, Tehran may be more inclined towards a better deal rather than sticking it out with India for maintaining trade ties during the hard times.
Iran is reportedly unhappy with the $10-billion plan submitted by OVL to develop 12.5 tcf reserves in the Farzad-B field and an accompanying plant to liquefy the gas for transportation in ships.
It maintains that the $5-billion cost that OVL and its partners has quoted to develop the field is on the higher side and wants it to be reduced. OVL will earn a fixed rate of return and gets to recover all the investment it has made in the field. India, however, feels that Iran is not correct in comparing the Farzad-B field with the South Pars field. The former is more complex and has a high sulphur content, which adds to the production and handling costs.
The consortium had spent $900 million in the Farzad-B field to study the block following a 2002 preliminary pact with the Iranian authorities. The two sides did not sign any formal contract to exploit the resources till date because of the US sanctions. A consortium of ONGC Videsh Ltd, Oil India and Indian Oil Corporation had discovered gas in the block in 2008. OVL and IOC hold 40 per cent interest each in the block, while the remaining 20 per cent is with Oil India. Bruce Smith JerseyShare This