‘No obligation’ to award project to India, Iran says on Farzad B field row

‘No obligation’ to award project to India, Iran says on Farzad B field row

As the issue escalated, India has asked its state-run firms to cut imports from Iran by 25%.

The Dollar Business Bureau

Despite India’s offer to spend around $11 billion (about Rs.70,000 crore) for the development of Farzad B gas field in Iran and building the infrastructure for exporting the gas, Tehran had stated that it is under ‘no obligation’ for awarding the contract for the gas field to India, according to media reports. 

New Delhi is willing to invest as long as Iran assures a “reasonable return” on the gas project. India’s state-run oil company ONGC Videsh Ltd has given the offer for investing around $6 billion in the Farzad-B gas field project and the remaining amount to spend in building a facility for liquefied natural gas (LNG) exports. 

On the contrary, Iran has signed an agreement with Russian gas company Gazprom in May, for developing the gas field that was discovered by a group of state-run oil companies of India.

On the other hand, India’s state-run companies’ consortium including Oil India Ltd and Indian Oil Corp, has been trying to acquire the development rights for the Iran’s Farzad-B field since 2009. 

Last month, India officially stated that it wants the Persian Gulf nation to reciprocate the confidence displayed by India in it with its decision to purchase substantial amount of crude from Tehran even when it was facing global sanctions. 

Last week, Asadollah Gharekhani, Iranian MP and spokesperson of Majlis Energy Commission, said that though Iran has allowed India to conduct technical survey on the field, providing development rights to the country was never a part of the agreement. 

“Under equal circumstances, this company (Indian consortium) could take priority. However, if there is a difference between the Indian company and other firms in terms of technology, technical know-how and investment, Iran will, based on the independence and freedom that is has, choose the company which would best serve the country's national interests,” Gharekhani told to Iran’s ICANA news agency.

On New Delhi’s decision to purchase less crude, Gharekhani said that Tehran had suffered losses by letting India pay in Indian rupees for the crude purchases.

As the issue escalated, India has asked its state-run oil firms to reduce imports of crude from Iran by at least 25%.

On this, Iran retaliated by cutting short the 90-day credit period to 60 days, given to Mangalore Refinery and Petrochemicals Ltd and Indian Oil Corp.

National Iranian Oil Co (NIOC) also reduces the discount from 80% to about 60%, which it gives to Indian importers on the freight.

Both the countries have failed to conclude a commercial agreement on Farzad B in spite of the optimism expressed by Indian Prime Minister Narendra Modi and Iranian President Hassan Rouhani on the issue when they met last year in Tehran. 

The Dollar Business Bureau - Jul 31, 2017 12:00 IST