The ONGC Group, which is looking at business opportunities in the US and Canada, has given the former an assurance that it will adhere to the conditions laid down against dealing with sanctions-hit countries, such as Iran.
Until now, ONGC Videsh Ltd (OVL) has been unable to make an entry into the US shale gas business because of its interests in sanction-hit countries; other Indian companies have gained a foothold there.
Analysts cite two reasons for ONGC’s interest in the US — one, to attract foreign investors if OVL decides to go for overseas listing and, two, the shale business.
The sanctions specify restrictions on import and export of crude oil, petroleum and petrochemical products into or out of Iran. They also limit the investments in providing goods or services to support Iran’s development of petroleum resources.
OVL reportedly hired a specialist lobbying firm in the US to present its case to American lawmakers on issues related to its oil and gas operations in India and its future focus on the US oil and gas market.
However, the Group continues its business links with Iran, which includes crude sourcing by Mangalore Refinery & Petrochemicals Ltd and exploration interests by OVL. To avoid US and EU sanctions, the Government has been looking at floating a separate company to develop an oil and gas block in Iran. However, officials remained non-committal and played this down, as Prime Minister Manmohan Singh is set to visit the US later this month.
Iran has been a major crude oil supplier to India. But, following the sanctions, it lost its position as second-largest supplier to countries such as Iraq and Venezuela. According to the reports, the new regime in Iran has communicated that it would like Indian refineries to re-negotiate Euro payments for crude oil purchases.
Iran has also indicated that OVL will not be given a special dispensation after its huge gas find in Iran. OVL is keen to develop the Farzad-B gas find in the Farsi offshore block in Iran. The field is estimated to hold in-place reserves of up to 21.68 trillion cubic feet (tcf), of which 12.8 tcf of gas and 212 million barrels of condensate may be recoverable.
The previous regime of Iran seemed inclined to offer the block under a production sharing agreement (PSA), a deviation from its existing exploration regime. However, the new regime has reportedly indicated that this is not possible.
While globally most countries offer PSA, a few follow the service contract route. In the latter, payments are made in accordance with the service rendered. However, the company rendering such services is not entitled to any share in oil/gas. In a PSA, the company concerned takes calculated risk in investing in an upstream venture and is entitled to a share of the resulting oil/gas production.
richa.mishra@thehindu.co.in