Bid & Tender
India and Iran Gas Deal Not Expected Before Third Quarter

Date : Mar 23, 2017

According to the report, any definitive agreement between India and Iran on the development of the Farzad B offshore gas fields, in the Persian Gulf, seems unlikely before the third quarter of this year. Despite India’s ONGC Videsh having submitted a curtailed $3-billion development plan to the Iranian national oil company and despite several rounds of government-to-government negotiations, no deal could be settled by February – the deadline that was set when the previous one was missed last year, a senior Indian government official says.


He says the major bone of contention between the two countries is the $10-billion development plan submitted earlier by ONGC Videsh, the overseas arm of India’s national oil and gas exploration and production major. The Iranian government had not accepted the investment proposal considering it too high, since the Gulf nation would need to offer a guaranteed rate of return on the investment. At the same time, no agreement could be reached on the gas purchase price offered by the Indian government to ship production back to India, he added.


In response to the Iranian government not accepting the initial investment proposal, ONGC Videsh curtailed its investment plan, jettisoning a proposed gas liquefaction plant that would have enabled liquefied natural gas to be shipped back to India. However, having scrapped the liquefaction plant, it was not clear how India would benefit from the project without accessing and transporting the energy resource to meet its domestic demand, the official said.


Indian government sources have pointed out that negotiations between the two countries were also dogged by conflicting signals emanating from within the two governments, in addition to the differences on details of the project and investments. India pointed out that other Iranian oil companies had announced that the Iranian government would invite bids for development of Farzad B, despite ONGC Videsh having submitted its proposed development plan to the Iranian Offshore Oil Company. Indian sources pointed out that such indications of other Iranian oil companies pushing for development of Farzad Bweakened India as the first choice investor for the project.


At the same time, last month, Iranian Ambassador to India, Gholamreza Ansari was quoted in the local media saying, “It is up to India to decide on oil and gas ties. It depends on the market. On price and many such elements.” “We hope to conclude negotiations but India has to be more assertive. The Iranian market is becoming very competitive. That is why we were expecting, before the sanctions and even during sanctions, to do something on this project. During the sanctions, there was an exceptionally generous offer from Iran to India. But because of Indian reservations, it did not happen,” the Ambassador was quoted as saying.


Farzad B, with estimated gas reserves of 13-trillion cubic feet, was first awarded to India for development in 2010 at the peak of western economic sanctions against Iran. But subsequently, Iran, soon after sanctions were lifted, started considering inviting fresh bids for the gasfield's development. However, last year, following a diplomatic push, both countries agreed to start talks on India developing the asset, with November 2016 initially set as the deadline for reaching an agreement.