India rushes team as Iran puts OVL on notice over Farzad-B deal

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NEW DELHI: Iran’s first post-sanctions oilfield deal, targeted to be sealed this month with India, appears to have got bogged down over money matters. Free from Western curbs and with big oil majors waiting in the wings to re-enter the country, Teheran is playing hardball over the Farzad-B gas field and has put ONGC Videsh Ltd on notice after describing its $10-billion plan for developing the Farzad-B gas field as unacceptable.

The oil ministry, on its part, has sent an official delegation to Teheran under Sunjay Sudhir, joint secretary in the oil ministry, in a bid to breaking the logjam. “The two sides agreed to make their best endeavours to conclude the definitive agreement by February 2017,” the oil ministry said in a statement on Wednesday.

In a joint statement issued from Teheran after a meeting in April between oil minister Dharmendra Pradhan and Zanganeh, the two countries had said a deal would be in place by October. That deadline looks set to be missed.

“Several rounds of negotiations so far have been held with the Indian state company on the development of Farzad-B. But ONGC’s financial proposal for the project is not acceptable,” Iranian newspaper Financial Tribune quoted the country’s oil minister Bijan Namdar Zanganeh as having told Mehr news agency.

“We won’t wait any longer for the Indians and if they fail to propose a sound financial proposal in the meeting planned for this month in Tehran, we will change our mind,” the report quoted Zanganeh as saying.

This is a clear warning to ONGC Videsh, given that Iran earlier this month opened field investments to foreign bidders, the first auctions after lifting of the sanctions. The auctions are to be held under a new framework, more remunerative for investors. But the Farzad-B is part of a government-to-government deal and is expected to follow the older framework where foreign companies were treated as contractors for field development and get a fixed fee.

ONGC Videsh wants a “reasonable” rate of return on the investment, while Iran is only offering a fixed fee. ONGC Videsh does not find this remunerative and want a higher percentage, which Teheran is resisiting.

The field, located in the Farsi block, was discovered by an Indian consortium led by ONGC Videsh in 2008. It has an in-place gas reserves of 21.7 Tcf (trillion cubic feet), of which 12.5 Tcf is recoverable.

ONGC Videsh plans to liquefy the gas and bring it to India. Western sanctions delayed progress on the project as investing in it would have invited curbs on it under the sanctions. The two countries picked up the thread after sanctions were lifted.
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