US President Barack Obama’s visit to New Delhi next is likely to take bilateral relations to new height. But ahead of the much-hyped visit, India is likely to urge the US to take...its oil and gas explorer ONGC out of the category of “commercially active firms” in Iran.
Once a firm is classified as commercially active, it runs the risk of being debarred from investment in other major markets, especially in North America.
The overseas arm ONGC, OVL has pumped in around $90 million in finding hydrocarbons in the Farzad B field in Iran’s Farsi block.
However, a final agreement in this effect is yet to materialise. The finalisation of the pact may result in potential investments of $3-5 billion.
There are some geopolitical issues that are delaying the signing of the pact.
While, ONGC figures in the US’s list of commercially active firms in Iran, OVL does not.
“India wants the interest of its companies to be hassle free in Iran or in the US,” a leading financial daily quoted a senior government official as saying.
Petroleum minister Dharmendra Pradhan had sought external affairs minister Sushma Swaraj’s intervention to help resolve the situation. India’s request is already being taken up with the US, the official said.
India recognises sanctions imposed as per the UN charter. In the case with Iran, India has been unable to pay for crude oil imports in light of tightened US sanctions making it difficult to access US dollars for transactions.
The Farzad B field, estimated to have 21.68 trillion cubic feet (tcf) of gas reserves, was found by OVL, after a 2008 preliminary pact with the Iranian authorities.
However, no formal contract to exploit resources has been signed till date.
US sanctions on Iran prevented both sides from making any head way in commercial exploitation of the reserves, with each blaming the other for the delay.
OVL is the operator of Farsi block that hosts the Farzad B field with 40% stake, while Indian Oil has another 40% interest, with Oil India holding the remaining.
After western sanctions on Iran for its alleged nuclear activities in 2012, India has drastically reduced imports from Iran and started buying more from suppliers such as Colombia, Mexico and Venezuela.
During the financial year 2014, India bought 11 million tonne of crude from Iran and the volumes are likely to be the same this fiscal.
In 2009-10, crude oil imports from Iran were to the tune of 21.20 million tonne, which was cut to 18.50 million tonne in 2010-11; 18.11 million tonne in 2011-12 and further dropped to 13.14 million tonne in 2012-13.
Pradhan is understood to be seeking the external affairs ministry’s intervention to help resolve several situations, including ensuring exclusion of ONGC by US from the category of those companies “commercially active” in the Iranian energy sector.
ONGC Videsh, a Miniratna PSU is the wholly-owned subsidiary and overseas arm of Oil and Natural Gas Corporation Limited (ONGC).
The primary business of ONGC Videsh is to prospect for oil and gas acreages outside India, including exploration, development and production of oil and gas.
Presently, ONGC Videsh owns Participating Interests in 33 oil and gas assets in 16 countries and contributes to 14.5 percent and eight percent of oil and natural gas production of India respectively. In terms of reserves and production, ONGC Videsh is the second largest petroleum Company of India, next only to its parent ONGC.ONGC Videsh has stake in 33 oil and gas projects in 16 countries.
ONGC Videsh has emerged as India’s most internationalized company based on the Trans nationality Index (TNI) as per survey conducted jointly by Indian school of Business (ISB), Hyderabad and Fundacao Dom Cabral (FDC), Brazil.