ONGC’s Iran investment plans hit by India-US dialogue

A resolution for ONGC, which has inched closer to finalising an agreement with Iran on a $4-billion investment plan for the development of the Farzad B offshore gas fields, pruned from an initial planned investment of $11-billion, would depend on the twice-postponed meetings of the Foreign and Defence department heads of India and US, at the so-called “two plus two” bilateral meet sometime later this year.

“In view of US sanctions against Iran and the Trump Administration’s unequivocal diplomatic message to India to bring down oil imports from Iran to zero, the decision on Farzad B investments are not in the hands of ONGC,” a senior government official said.
“The ‘two plus two’ bilateral meeting, whenever it is held, after being twice postponed, will discuss a range of issues between India and US. Indian oil imports from Iran are most likely to figure but any exemption from secondary sanctions looks slim at this point of time, and so too the future of Farzad B investments,” he added.

Senior Indian officials have visited Washington for a preparatory meeting for the bilateral dialogues, but both the April and July dates were postponed on the grounds that the US Secretaries of State and Defense were preoccupied; however, unofficially senior Indian government officials have speculated that India’s ties with Iran and Russia were the reason behind the US Administration’s ambivalent stance on pushing ahead with India ties.
Sources said that the US’s tough sanctions against Iran had placed India in a piquant situation as the country could not possibly reconcile with bringing crude oil imports from Iran to ‘zero’ as sought by the US, while seeking exemptions from secondary sanctions to push ahead with ONGC’s Farzad B investments.
India has officially communicated that it recognizes only UN sanctions against any country, but has also communicated to government oil refining and marketing companies to prepare for a drastic reduction in crude oil from Iran, the third largest supplier of oil to India.
ONGC Videsh, the overseas arm of ONGC, discovered the estimated 21-trillion cubic feet of Farzad gas reserves in the Persian Gulf almost a decade ago, but the development of the asset had proved to a ‘diplomatic challenge’, government officials said.
Even if India-specific exemptions were to be secured through India-US meetings, the developer would be hamstrung as most of the large and well-equipped oilfield service providers were companies based in the West, which might not be willing to risk violating US sanctions, the officials added.