Page 13 - MEOG Annual Review 2021

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felt particularly acutely in the oil and gas sector, – under an exploration service contract that
with Oil Minister Bijan Zanganeh announcing expired in 2009, after the field was declared
this week that he would not continue in his role commercial.
after the election. He was quoted by state energy Since then, the Indian consortium has been
media outlet Shana as saying: “I am retired, but I unable to win the developments rights for the
will remain in politics.” field. In 2018, OVL, the overseas arm of state-
During the last few years of the Rouhani owned Oil and Natural Gas Corp. (ONGC),
presidency, the oil and gas sector has been made a revised offer to spend around $11bn
dominated by the shift towards the utilisation in developing Farzad-B, a cost which included
of domestic companies to build out capabilities building the infrastructure to export the gas.
at major assets following the disappointment of At that time, Iran deferred the decision, owing
the US pulling out of the JCPOA in 2018 and the to the expense involved, saying that the upstream
resultant abrupt end of talks with IOCs. development part of it should cost no more than
Despite the apparent recent progress towards $5.5bn. The Indians insisted that the minimum
resuming diplomatic relations between the US cost for the upstream segment alone would be
and Iran, Tehran has enjoyed success in devel- $6.2bn, with another $5bn or so required to
oping a ‘resistance economy’, predominantly build a connected LNG export facility.
through petrochemicals in the energy sector, The Indian side also objected to Iran’s demand
and local firms are likely to be given priority that India buys all of the natural gas produced
rather than waiting for foreign help. from the Farzad-B block at a price equivalent to
the rate Qatar charges for selling LNG to India
Farzad-B award under a long-term deal – $7 per million British
It is with this in mind that NIOC this week thermal unit (mmBtu).
awarded a $1.78bn deal with subsidiary Pet- In Q1 2018, Tehran dithered over whether to
ropars for the development of the offshore resume collaboration on the asset with Indian
Farzad-B gas field. companies or to award a deal to Gazprom. How-
Under the deal, Petropars will target sour gas ever, the difficulties faced by overseas firms in
production of 28 mcm per day over five years, doing business with Iran amid US sanctions have
tapping the field’s in-place resources of 23 tril- kept the project in limbo since.
lion cubic feet (651bn cubic metres) of gas and The Indian consortium was reported to have
around 115mn barrels of condensate. Previous offered a price of $3-4bn for the entire upstream
studies determined that around 16 tcf (453 bcm) part of the development.
of gas and 80mn barrels of condensate could be On May 17, Zanganeh told Shana: “The
recoverable. The reservoir, which is located in Indians were not willing to take part in the pro-
the 3,500-square km Farsi block at a water depth ject. We negotiated with them twice ... but they
of 20-90 metres, is shared with Saudi Arabia, refused to develop the field due to sanctions.”
where it is known as the Arabiah field. Meanwhile, Rouhani said in late 2019 that
Gas produced from the field will be piped to an investment of $75mn would be made in
Iran’s Pars 2 refineries in Bushehr. Farzad-B by “tapping the domestic resources of
The buyback deal was signed by Hamid Reza NIOC in the first phase”, noting that the remain-
Masoudi, the CEO of Petropars, and Pars Oil & ing capital for financing the project would be
Gas Co. (POGC) Mohammad Meshkinfam on procured under buyback or integrated petro-
behalf of NIOC. POGC is a fellow subsidiary of leum contract (IPC) terms.
NIOC and holds ultimate responsibility for the The Farzad-B development is perhaps a
development of the South and North Pars pro- microcosm of the wider Iranian approach to its
jects, where Petropars works on the surface and oil and gas sector. Western IOC involvement is
subsurface. highly prized and these companies are likely to
Farzad-B was discovered by an Indian con- find great opportunity, but having been burnt
sortium – comprising ONGC Videsh Ltd (OVL), just a few years ago, Tehran is determined not to
Indian Oil Corp. (IOC), and Oil India Ltd (OIL) allow its progress to be put on hold.™

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