Sanctions weigh on India as it considers Iran's gas offer

[The Messiah]

Sanctions weigh on India as it considers Iran's gas offer

Tehran offers guaranteed share in production to reverse decline in India's crude purchases

Three Indian companies are actively considering Iran's revised offer of production sharing contracts (PSCs) in the energy sector, including one for developing the prolific Farzad B gasfield.

The companies are ONGC Videsh Limited, Oil India Limited and Indian Oil Corporation.

This is the first time since the 1979 Islamic Revolution that Iran has offered these companies PSCs in an attempt to reverse the decline in crude oil purchases by India. The offer is seen as a big step towards further cementing bilateral ties and marks a departure from Iran's earlier practice of offering Indian companies 15 per cent fixed returns under a buy-back arrangement with the national oil company of Iran.

Western sanctions

However, diplomatic sources said New Delhi would have to weigh the consequences if it chose to accept the offer, because of the sanctions the U.S. and the European Union imposed on Iran, primarily targeting its oil industry so as to force Tehran to halt its nuclear programme. In 2011, Indian companies opened talks with Iran for developing the gasfield. But a subsequent meeting did not materialise because India was apprehensive of the impact of the sanctions on its companies.

During his visit to India in May, Iranian Oil Minister Rostam Qasemi offered the Indian firms PSCs to pep up investment in the upstream sector. In fact, Iran offered to ship gas to India in liquefied form through Oman. Interestingly, Iran does not have the technology to liquefy gas, so it agreed to do the process in Oman.

Because of the sanctions, Iran's crude oil supplies to India have dwindled in the past few years. During 2012-13, India's import dipped by over 26.5 per cent to 13.3 million tonnes, as against 18.1 million tonnes the year before. Also in 2012-13, Iranian supplies accounted for 7.2 per cent of India's oil imports, down from 10.5 per cent in the previous year.

Talks since 2009

Since 2009, the Indian firms have been into talks with Iran for developing the Farzad B gasfield in the Farsi block of the Persian Gulf. According to initial estimates, it possesses 21.68 trillion cubic feet (tcf) of gas, with recoverable reserves of 12.8 tcf.

Production target in the first phase would be 1.1 billion cubic feet per day. In the second phase, this figure would go up to 1.65 billion cubic feet per day and to 2.2 billion cubic feet per day in the third. The investment for exploration is put at $5.5 billion, with an extra $8 billion-$9 billion for developing the field and building a liquefied natural gas (LNG) terminal, and for transport. This gas could go directly to India as LNG. The PSCs offer the Indian companies a guaranteed share of production.

Sanctions weigh on India as it considers Iran's gas offer - The Hindu

 

[TrueSpirit]

GoI would work out exemptions as usual. We do not have much of a choice.

 

[drkrn]

GoI would work out exemptions as usual. We do not have much of a choice.

as far as know america exempted india,china, and japan from dealing with iran

 

[The Messiah]

as far as know america exempted india,china, and japan from dealing with iran

That was regarding oil i think.

Point is we shouldn't care what they think, they are still arming terrorist state and also arming al-qaida in syria and creating a 'hallah' on iran.

 

[The Messiah]

Oil and gas problems: India must grab opportunities in Iran and Iraq

Western bullying has not really helped but sanctions have caused serious economic hardship to Iran. No progress was made in new projects for many years due to the difficult conditions in Iraq. India must look for opportunities in both the countries in oil and natural gas

India imports 184 million tonnes (MT) of crude of which 13%, or to 24 MT came from Iraq in 2012-13. In the same period, Iran supplied 13.3 MT, as against 18.1 MT in 2011-12, due to the sanctions imposed by the US and the European Union.

These sanctions were imposed primarily to force Iran to halt its nuclear programme, which Iran has stated, time and again, that it is in the interest of the country and only for peaceful purposes. It has managed to dodge various UN resolutions and has not had full inspection by UN/AEC, etc. Western bullying has not really helped but sanctions have caused serious economic hardship to the country.

In the case of Iraq, way back in 2000, during Saddam Hussein's regime, ONGC Videsh became the sole licensee for block No 8, a large on-land block in the western desert, which became effective in May 2001, but no progress was made thereafter due to the difficult conditions in the country.

After the invasion and overthrow of Saddam Hussein and the limping back to normalcy in 2008, ONGC Videsh continued its work under the new gas and oil law; and the block No. 8 is now estimated to hold 645 million barrels of reserves, out of which 9% (about 54 million barrels) are likely to be recovered. The actual production may vary—lower or even higher than the present estimates.

Meanwhile, Iraq has also offered three new blocks, in the Middle Furat oilfields, where oil has been discovered, on a nomination basis. At the moment, no details are available on the estimated reserves or the type of crude from exploratory holes drilled at the site.

Iraq has also expressed interest in the Paradip refinery proposed to be set up by Indian Oil Corporation (IOC) in Odisha.

All these were stated by petroleum and natural gas minister Veerappa Moily. He felt that in view of the generous offer, work can start immediately as no time would be really be spent in exploration that is normally associated in this industry.

The petroleum minister should now move on this issue immediately and no time should be lost in accepting the offer and commence work.

In the case of Iran, all the three companies involved, viz, Oil India, ONGC Videsh and IOC, have shown keen interest to accept the proposed offer of production sharing contracts, whereby a 15% fixed return under the buy-back arrangement with national oil company of
Iran.

The only stumbling block is the US and European Union's sanctions against Iran which primarily targets the Iranian oil industry. Presumably, to overcome this impasse and technical snag, Iran oil minister Rostam Qaseme has offered to ship the gas to Sultanate of Oman in liquefied form where it can be processed into LNG which can then be shipped directly to India!

At the same time, Indian firms' interest to develop the gas fields in Farzad B, where the initial estimates have shown recoverable reserves of 12.8 trillion cubic feet must be followed up seriously by the Indian oil ministry so that contracts can be signed and spadework initiated at the site.

These developments are encouraging, and it now remains to be seen how seriously and effectively the government works on the offers received.

Oil and gas problems: India must grab opportunities in Iran and Iraq - Moneylife