EghtesadOnline: ONGC Videsh Ltd has opted to invest in developing a giant gas field in the Persian Gulf, for which a revised cost is being worked out, an unnamed official said.
OVL, the overseas arm of state-owned Oil and Natural Gas Corp, had last year made its best offer to spend $11 billion in developing the Farzad-B Gas Field in the Persian Gulf as well as in building the infrastructure to export the gas, but Iran deferred on awarding the rights of the field to the Indian firm owing to differences over investments and price of gas, Money Control reported.
The company has now agreed to only implement the upstream field’s development, leaving the marketing of the fuel to Iran, the official said.
As had been agreed during the visit of Iranian President Hassam Rouhani earlier this month, a team of OVL officials is expected to visit Tehran this week to discuss modalities of the upstream development, according to Financial Tribune.
"We had initially thought that the upstream field development would cost $6.2 billion. But, this is not the final cost. We will be able to arrive at a final cost only after we drill a well to appraise the discovery we had made about a decade back," the official said.
"Only after the appraisal well is drilled and data analyzed to see the extent of the field and recoverable reserves can a final cost be put. OVL would put forth the idea of being allowed to drill an appraisal well on the field."
The appraisal well may take 9-10 months to be drilled and completed. Farzad-B was discovered by OVL in the Farsi block about 10 years ago. The project has cost the OVL-led consortium, which also includes Oil India Ltd and Indian Oil Corp, over $80 million.
The field has an in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 tcf are believed to be recoverable. It has high sulfur content and separate facility would be needed to separate gas from it. Costs of these facilities can be established only after an appraisal well is drilled. In the master development plan OVL submitted to Iran last year, it estimated the upstream part to cost $6.2 billion while another $5 billion will be required to build a liquefied natural gas export facility.
While Iran believes the upstream investment should not be more than $5.5 billion, it wanted India to buy all of the natural gas produced from the Persian Gulf block at a price equivalent to the rate Qatar charges for selling LNG to India under a long-term deal at $7 per million British thermal unit.
The rate being sought by Iran was triple of $2.3 per mmbtu rate OVL is willing to pay for the gas during low global oil prices. India and Iran were initially targeting concluding a deal on Farzad-B field development by November 2016 but later mutually agreed to push the timeline to February 2017. The deadline to wrap up negotiations later targeted September 2017, but with the deal stuck over pricing of gas, no new deadlines have been proposed.