Iran agrees to take all of OVL’S Farzad-b gas
Iran has agreed to take the gas produced from the ONGC Videsh Ltd.discovered Farzad-b field in the Persian Gulf, but differences remain over returns on investments made by the Indian firm.
Iran had earlier conditioned granting rights to develop the Farzad-b fields to OVL on Indian firms buying all of the gas at the imported-lng equivalent rate, PTI reported.
This proposition, which involved an investment of $11 billion in first developing the field and then setting up a facility to convert it into liquid gas (liquefied natural gas or LNG) for shipping to India, was considered expensive, sources aware of the development plans said.
Iran has now written to OVL, agreeing to take delivery of all of the gas produced from Farzad-b offshore field at a landfall point in the Persian Gulf nation.
OVL — the overseas investment arm of state-owned Oil and Natural Gas Corp. (ONGC) — too has written back accepting the offer and has asked Iran to detail the delivery point, they said.
Sources said Iran has stated that it will take all of the unprocessed natural gas and asked OVL to re-do the investment numbers.
OVL, which had discovered the Farzad-b gas field in 2008, feels it can lower the upstream field development investment to under $4 billion from previously proposed $6.2 billion. On top of the $6.2-billion investment, another $5 billion was to be invested for setting up the LNG plant.
Sources said OVL will now do just the upstream field development plan and no longer set up the LNG plant.
Iran is offering 15 percent return on investment. However, after considering the conditions attached, the return comes to 5-6 percent only, sources said.
Sources said the upstream investment would be lower as unlike the previous proposal, OVL would not be setting up any plant to process the gas produced from the field. Farzad-b gas contains a high degree of sulfur and needs treating before it can be sold to users, they said.
OVL had last year made its ‘best’ offer to spend $11 billion in developing the Farzad-b field in the Persian Gulf as well as in building the infrastructure to export.
The company has now agreed to do just the upstream field development part, leaving the marketing of the fuel to Iran. Farzad-b was discovered by OVL in the Farsi block about 10 years ago. The project has so far cost the Ovl-led consortium, which also includes Oil India Ltd. And Indian Oil Corp. (IOC), over $80 million.
The field has an in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 tcf is believed to be recoverable.
India and Iran were initially targeting concluding a deal on Farzadb field development by November 2016 but later mutually agreed to push the timeline to February 2017.
The deadline to wrap up negotiations was later targeted for September 2017. But, with deal stuck over pricing of gas, no new deadlines have been proposed.