India is working to finalize a $3 billion deal with Iran on the
18.75 Tcf Farzad B gas field development in the Persian Gulf by
September 2017, sources at the oil ministry said Thursday.
The confirmation from India came after Iranian oil ministry news
service on Monday quoted the managing director of Pars Oil and Gas,
Mohammed Fam, as saying the company had put Farzad B's development
high on its agenda.
Pars is a unit of state-owned National Iranian Oil Co. responsible
for developing Iran's biggest offshore gas field, South Pars, as
well as the North Pars gas field, but it is not the company with
which India has primarily been negotiating.
That company is Iranian Offshore Oil Co., a sister company to Pars
to which ONGC Videsh (OVL), the overseas arm of India's state-run
Oil and Natural Gas Corp., has submitted a new master plan for
Farzad B and which operates in Iranian waters except for those
covering South and North Pars.
The new plan excludes liquefaction facilities, the Indian
ministry sources said.
It is some $7 billion cheaper than the original proposal that
included LNG production facilities, and is expected to be finalized
over the next six months once both the parties, OVL and IOOC, agree
on a gas price and a rate of return for the Indian entity's
investment in the Iranian gas field, they added.
A definitive agreement is likely to be ready by the first half of
the new Iranian fiscal year from April, the sources said.
NIOC GAS PRODUCER EYES PROJECT
It was not clear from the Shana statement how or whether Pars' and
IOOC's involvement in Farzad B's development would be coordinated.
The statement said only that Pars was in talks with an Indian
company over the field's development. It made no mention of OVL or
IOOC.
However, despite its limited geographic mandate up till now, Pars
could be a better fit for the Farzad B project than IOOC, due to its
long involvement with the massive South Pars field.
That would give Pars more experience in gas and condensate
production than IOOC, which is primarily an oil producer, and
especially with the intricacies of handling the sulfur-laden sour
gas typically present in Persian Gulf deposits.
OVL, as operator of the Farsi offshore exploration block, has
drilled an exploration well on the block. The resulting discovery,
Farzad B, is located in the middle of the Persian Gulf between the
Iranian port of Bushehr and Dammam, on Saudi Arabia's Gulf coast.
A consortium of OVL, Oil India Ltd. and Indian Oil Corp. discovered
the field in 2008. OVL and IOC each hold a 40% interest in a license
to develop the block, and OIL 20%.
Fam said Monday that Farzad B's development had been prioritized
because it was a "joint field" straddling an international border.
About 80% of the field lies in Iranian territorial waters with the
rest in Saudi waters, where it is known as the Hasbah field. Iran is
concerned that if Saudi Aramco gets a head start on developing its
side of the joint field, most of the gas may go to Saudi Arabia.
KEEPING UP WITH ARAMCO
Aramco has already drilled wells in Hasbah and started gas
production. In July 2016, India's Larsen & Toubro confirmed that
Aramco had awarded it and Emas Chiyoda Subsea a $1.6 billion
contract for the second phase of Hasbah's development.
Saudi Arabia's energy ministry and state-owned Aramco have set
domestic gas development as a priority as the country, which boasts
the Arabian Peninsula's largest economy, consumes all the gas it can
produce with demand still growing.
Iran, with significantly larger gas reserves than Saudi Arabia, also
consumes roughly as much gas as it produces but has long sought to
develop major gas exports. It is also keen to ramp up condensate
output, used domestically as petrochemicals feedstock and to blend
with crude for export.
India has been in talks with Iran over Farzad B since April, when
its oil minister, Dharmendra Pradhan, met his Iranian counterpart
Bijan Zanganeh to carry forward negotiations after Western sanctions
on the Islamic republic were lifted.
In October, India sent a top oil ministry official to hold follow-up
discussions on the future engagement of OVL in the Iranian gas field
with Hossein Zamaninia, Iran's deputy minister of petroleum.
Last month NIOC's managing director and Iranian deputy oil minister
Ali Kardor said the technical model presented by the Indians was
almost finalized, "but we have yet to reach agreement on the
financial framework because we are at odds over the gas price."
He added that Farzad B would be developed under an engineering,
procurement, construction and financing contract, to be awarded in a
competitive international tender process, if the talks with India
did not produce an agreement.
In addition to Farzad B, Pars is also considering development of
several other offshore Iranian gas fields including North Pars,
Golshan and Ferdowsi, Fam said.
--Ratnajyoti Dutta, newsdesk@spglobal.com
--Tamsin Carlisle, tamsin.carlisle@spglobal.com
--Edited by Maurice Geller,
maurice.geller@spglobal.com
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