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OVL's Farsi Block Investment Under Cloud

  • Oil and Natural Gas Corporation (ONGC), the state-owned energy explorer, may lose a promising offshore gas field in the Persian Gulf as it gets caught in the crossfire over international sanctions on Iran.ONGC Videsh Ltd (OVL), the overseas investment arm of ONGC, has so far invested $36 million in the gas field Farzad - B - bagged from Iran under an exploration services contract for the prolific Farsi block.While international sanctions against Iran are creating unanticipated hurdles to further invest in the block, Iran is pressurising the Indian company to complete certain formalities by this month-end.
  • The field estimated to entail a total investment of $5 billion was bagged by a consortium of ONGC, Indian Oil Corporation and Oil India Ltd in 2002. ONGC and IOC have 40% stake in the venture each and OIL holds the balance 20%.OVL has carried out the required surveys and drilled four exploratory wells in the block. Based on the results of the exploration, the Farzad - B field was declared commercial in 2008.The company now has to formally sign a development plan with National Iranian Oil Co to take the process forward.
  • “It is extremely difficult now to sign a formal contract since the sanctions on Iran make it difficult to procure equipment and other allied support for carrying out a full-fledged development of the field. It would be more or less on hold since it would involve high levels of investments amid extreme uncertainties,” a source said. Though the field is fit for commercial operations, OVL would not be able to work on them unless a development agreement is signed.According to sources, the company is coming under pressure from Iran, too, to sign an agreement by the month-end or face the cancellation of the agreement.“The company is likely to send a team to Tehran shortly to negotiate on the deadline for signing the deal. Even if a deal is signed, there is no certainty that the development of the field happens as planned owing to uncertainties over the equipment procurement in wake of the sanctions,” he said.

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