ONGC Videsh close to winning $5-bn Farzab-B gas field rights

New Delhi: ONGC Videsh Ltd-led consortium is close to winning USD 5 billion rights to develop Iran's Farzad-B gas field and convert the gas produced from it into LNG for shipping to countries like India.

"The first development phase of Farzad-B is expected to require USD 3 billion in investment," Saeed Hafezi, managing director of the Iranian Offshore Oil Company, was quoted as saying by Mehr News Agency of Iran.

The gas produced from the field will be converted into liquefied natural gas (LNG) for export to consuming nations like India.

OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has proposed to build one LNG train of 6 million tonnes a year.

A consortium of OVL, Oil India Ltd (OIL) and Indian Oil Corp (IOC) had discovered the 12.8 trillion cubic feet of gas reserves in the Farsi block in 2008. The discovery was named Farzad-B.

But the Indians firms were forced to put the project on backburner after the US and the EU introduced tough sanctions against the Persian Gulf country.

However, the agreement between Iran and six world powers last July has cleared the way for an easing of sanctions.

Hafezi said a new round of negotiations is underway with Indian contractors on marketing or delivering Farzad-B natural gas to India.

Gas output from the field can either be converted into LNG and shipped to India or transported through a pipeline via Pakistan or subsea.

"We can close a deal with Indians if the two sides agree on a contractual model and the method of gas supply or marketing," Hafezi added.

While the field development may cost USD 3 billion, another USD 2 billion would be required for setting up LNG plant.

OVL Managing Director Narendra K Verma said the company has not heard anything from Iran.

"I have not seen any paper from Iran granting us the development rights. We have to wait for that," he said.

Earlier this year, Iranian Oil Minister Bijan Namdar Zanganeh described Farzad-B as the only Iranian project "promised" to a foreign contractor.

As a further sign of interest in working with Indians in Farzad-B project, Iran did not list the gas field among the 52 oil and natural gas projects introduced to international companies in a major conference in Tehran last month.

OVL in August/September 2010 submitted a revised master development plan (MDP) for producing 60 percent of the 21.68 trillion cubic feet of in-place gas reserves but had not signed the contract because of threat of being sanctioned by the US which is against any company investing more than USD 20 million in Iran's energy sector in any 12-month period.

OVL and IOC hold 40 percent interest each in the block, while the remaining 20 percent is with OIL.