Iran Replaces OVL in Offshore Oil Block

From Times of India

Iran has given to a domestic company the task of developing an offshore oilfield that was discovered by an Indian consortium led by ONGC Videsh Ltd (OVL) but later abandoned as commercially unviable. OVL and its partners IndianOil Corporation and Oil India Ltd had in 2009 dropped plans to develop the Binaloud oil find in the Farsi offshore block as they found one billion barrels of reserves commercially unviable.

But as Iran’s semi-official Mehr news agency reports said, Iranian Offshore Oil Company has found production of heavy crude oil from the field would be possible in the near future. On the surface, Iran’s move may appear as a logical progress in a commercial matter. But given the technical limitations of its refineries, capacity constraints and curbs on oil exports, it signals Tehran’s unhappiness with India for dragging its feet on oil and gas projects — development of other fields, liquid gas export terminal and the gas pipeline.

In February 2012, Iran had issued an ultimatum to OVL to decide whether it would develop Farzad B, a huge gas find in the Farsi block, after the company missed the November 2010 deadline that had been set for the investment decision.

Progress has also been stalled on several other oil and gas fields as well as associated projects won by Indian oil companies due to sanctions by the US and other western countries. Even the talks on the Iran-Pakistan-India pipeline have come to a standstill, ostensibly over differences on pricing and other commercial mechanisms.In all such cases, both sides have been playing hardball on negotiation tables, each accusing the other of not keeping their part of the deals. Sources said OVL is yet to sign the development contract as it is wary of participating in Iranian oil and gas sector for fear of being sanctioned by US and EU.

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