Indian oil companies considering Iran’s gas offer
India is thinking over Iran’s offer of Production Sharing Contracts (PSCs) in the energy sector, including one for developing the prolific Farzad B gasfield in the Farsi block of the Persian Gulf.
This is the first time since the 1979 Islamic Revolution that Iran has offered three Indian oil companies — ONGC Videsh Limited, Oil India Limited and Indian Oil Corporation — PSCs at a time of diminishing crude purchases by India.
The offer marks a departure from Iran’s earlier practice of offering Indian companies 15% fixed returns under a buy-back arrangement with the national oil company of Iran and also indicates towards Iran’s intention of improving ties with India. The PSCs offer the Indian companies a guaranteed share of production. However, India would have to analyse the advantages and disadvantages before accepting the offer, because of the sanctions the U.S. and the European Union imposed on Iran, primarily aiming its oil industry, to pressurize Tehran to give up its nuclear programme.
- 2011: Indian companies opened talks with Iran for developing the gas field. But a subsequent meeting did not materialise because India was apprehensive of the impact of the sanctions on its companies. The impact of sanctions led to cut down in Iran’s crude supplies to India in the past few years.
- May 2013: Iran had offered the Indian firms PSCs to increase investment in the upstream sector. As a matter of fact, Iran offered to ship gas to India in liquefied form through Oman. Iran does not have the technology to liquefy gas, so it agreed to do the process in Oman.
- During 2012-13, India’s import plummeted by over 26.5% to 13.3 million tonnes from 18.1 million tonnes the year before. In 2012-13, Iranian share was 7.2% of India’s oil imports, down from 10.5% the previous year.
Farzad B Gas Field – Indian exploration in Iran
Since 2009, the Indian companies are negotiating with Iran for developing the Farzad B gasfield. As per initial estimates, it contains 21.68 trillion cubic feet (tcf) of gas, with recoverable reserves of 12.8 tcf. The investment in 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.