Policy
IOC May Acquire BPCL Refineries If Privatisation Works Out As Planned
more...


India Makes Progress In Diversifying Crude Import Sources
more...


Indian Oil PSUs Find Russia’s Vostok Oil Project Tantalizing
more...


India To Remain Invested In Vietnam’s Oil Sector
more...


Consistent Rise In Petrol Consumption May Create Problem For Refineries
more...

Regulation
Demand For LNG Depends More On Price Than Domestic Production
more...


First FSRU Becomes The Second, A Total Of Two Now
more...


India To Open Pumps To Supply Ethanol Blended Petrol?
more...


A Sensible Strategy To Promote Use of Natural Gas In North East
more...

Alternative Energy / Fuel
NTPC Renewable Energy Inks Pact To Sell Power From 150 Mw Solar Project
more...

New Projects
IOC To Use Drones To Check Fuel Thefts From Pipelines
more...


Brahmapuram, Nallalam Projects To Switch To LNG
more...


Mangala Field Celebrates 12 Years Of Prolific Production
more...

Market Watch
IOC Launches Branded Gasoline Fuels With Higher Octane Ratings
more...

Companies
Alphageo (India) Limited
more...


Wabag Secures Rs 840 Mn Order In Malaysia For Petronas Refinery
more...


Adani Green Energy Raises $ 750 Mn
more...

Press Release [FREE Access]
Petro Intelligence » Farzad B: Pawn In The Game Of Geo-Politics

By R. Sasankan

When Iran announced its decision to dump the Indian consortium of public sector companies from the development of Farzad B, the giant gas field in the country, it did not come as a big surprise. In many ways, the announcement had been anticipated -- reflecting another instance where geopolitical machinations on the diplomatic chequerboard decide commercial outcomes.

Farzad-B is an offshore natural gas field 20 kilometres off Farsi Island in Iran. The total in-place reserves of the gas field is around 21.68 trillion cubic foot of which around 60 per cent is recoverable.

The Indian consortium had been asserting its right to develop the gas field which it had discovered back in 2008. But it was always going to be extremely difficult to pull it off after the Indian government under then Prime Minister Manmohan Singh relentlessly pursued a Civil Nuclear Cooperation Agreement with President George W. Bush of the US at around the same time that the field was discovered.

President Bush had always characterised Iran as part of an evil triad that acted in a manner inimical to American interests. It was never going to be easy for India to bag the development rights for Farzad B after the UPA government decided to cosy up to Iran's greatest enemy. For India, the pursuit of the nuclear agreement with the US took primacy over everything else since the Manmohan Singh government wanted to finally put behind it the dark period of isolation that the nation faced after the nuclear test conducted in Pokhran in 1998.

In one sense, the fate of the Farzad B field was decided right then. India was more or less reconciled to the loss of the development rights to the Iranian gas field. In purely monetary considerations, it will not even qualify as a loss since the consortium only had a development Service Contract for Farzad B. The Indian companies are expected to be reimbursed the entire investment they had made till now in Farzad B. The Indian companies that were part of the consortium included ONGC Videsh Ltd, Indian Oil Corporation and Oil India Ltd.

The gas discovery in Iran underscored the solid credentials of the Indian consortium. The US obviously did not want India to move closer to Iran, a condition which could not be violated. Iran's fury over the deal, which had been simmering for all these years, eventually led to the May 17 announcement that snuffed out any hopes that the Indians might have had of bagging the Farzad B rights.

Iran eventually awarded the contract for developing the giant gas field to a local company. "The National Iranian Oil Company (NIOC) has signed a contract worth USD 1.78 billion with Petropars Group for the development of Farzad B Gas Field in the Persian Gulf," a terse statement said.

Iran has always viewed India as a strong friend. But even geo-political alignments can change very quickly when the two sides are no longer fully committed to preserving their historical equation. The Iranian leadership was always allergic to the George Bush administration. The situation only worsened after President Donald Trump re-imposed economic sanctions against Iran.

The drift between the two nations widened further when India chose to actively pursue a new geo-political alliance under Trump by drawing closer to Israel. Iran despises Israel and, therefore, India's perceived closeness to Tel Aviv meant that there was no way that the Farzad B deal could ever be resurrected.

President Joe Biden is considered to be soft on Iran and is widely expected to lift either totally or partially the sanctions against Iran in the not-too-distant a future. Suddenly, Iran and Saudi Arabia, the two rivals in the Middle East, have acknowledged that they are talking to each other in a bid to settle their own differences. There is speculation that the talks have been prompted by President Biden. This is a welcome development. But nothing dramatic can be expected from these talks. "I do not believe Iran and Saudi can realistically come together as friends. Israel would have to be part of any such arrangement in the Middle East and, from the looks of it, that is a far cry with or without Biden,” said an acknowledged expert on the Middle East. In his view, the best that Saudi Arabia and Iran can hope for is some kind of an agreement on Yemen.

The developments surrounding Farzad B is a huge setback for the relations between India and Iran but there is no reason to believe that the two nations would want to strain their relations any further. A close India-Iran relationship is meaningful to India as well as the West and Russia in the light of China's sway over Pakistan. China is keen to establish control over Gwadar, a port city on the south western coast of Balochistan. The city is located on the shores of the Arabian Sea opposite Oman. This becomes all the more critical on the global chessboard as US prepares to move out of Afghanistan.

For India which imports close to 84 per cent of its crude oil requirement, Iran will be an important source of crude supply once the sanctions are lifted. There is no shortage of crude in the market but the biggest attraction for Iranian crude is that it is relatively cheap given the country's geographical proximity to India and the lucrative credit terms that Iran offers.

Quite a few Indian refineries were designed to process Iranian crude. Faced with the negative implications of a sharp decline in gross refining margins (GRMs), Indian refineries have become only too keen to source Iranian crude once the sanctions are lifted. Iran has huge gas reserves that have yet to be tapped, and India needs gas to meet its energy needs. Be it crude or gas, India and Iran stand to benefit immensely from robust trade relations.

Iran is normally considered to be inflexible on certain issues and can at times become impetuous in its decision making. India-Iran relations can become strained in the future because of India's increasing closeness to Israel, Saudi Arabia and the UAE. For Iran, Israel is untouchable. But Israel is more pragmatic in the conduct of its trade relations with India. It will not in any way try to exert influence to scupper trade relations between India and Iran. This means that the Indian leadership will have to deal a little more imaginatively with Iran to ensure a continuum in its commercial relations with Tehran.



To download the latest issue 'Volume 28 Issue 11 - September 10, 2021', click here
Petro Intelligence [FREE Access]
BPCL Selloff: Foreign Equity Players May Be Fronting For The Big Boys
more...

When Competition Comes A Cropper
more...

No Logic In Expanding Crude Storage Capacity
more...

India’s Business Ties With Saudi Arabia, UAE Call For A New Dimension
more...

Foreign Investment
Petronas To Expand Joint Venture With IndianOil
more...


Nayara Energy Ties Up Rs 40 Billion For Foray Into Petrochemical Biz
more...


Cairn Energy Proposes Capital Return Of US$ 700mn
more...

Overseas Investment
OVL, IOC Sign Pact With Russia’s Gazprom
more...


ONGC Videsh Relinquishes Israeli Oil Block
more...

Gas Scene
Sector-wise Consumption Of Natural Gas in July 2021
more...


Domestic Natural Gas Scene In July 2021
more...


Natural Gas Price Trends: Global And Domestic
more...


Sectoral Consumption of Natural Gas In June 2021
more...


Domestic Natural Gas Scene: June 2021
more...


Sector-Wise, Month-Wise Demand & Consumption of Natural Gas
more...


Growth In Import Dependency Of Natural Gas Halted
more...


Natural Gas Price: Global and Domestic
more...


Sector-Wise Consumption Of Natural Gas In May 2021
more...


Natural Gas Price Trends : Global And Domestic
more...


Sector-wise Consumption Of R-LNG, Domestic Gas Since FY 2018-19
more...


Natural Gas: India’s Increasing Import Dependency
more...


CGD Becomes An Attractive Business In India
more...

Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Profit After Tax (PAT) Of Oil Companies
more...


India’s Rig Count Marginally Up In July
more...


The Rise And Fall Of India’s Petroleum Products Export
more...


Global Oil Demand Is Poised To Rise
more...


Global Rig Count Up
more...


Indian crude oil basket price in August 2021
more...


Contribution of Petroleum Sector to Union and State Exchequers
more...


Retail Selling Price of LPG, Kerosene in India & Neighbouring Countries
more...


Petroleum Products: Industry Consumption Trend Analysis
more...


Petroleum Products Import Down, Exports Up In July 2021
more...


India’s Crude Oil Import Up in July, OPEC’s Share Edges Up
more...


Share Of Domestic Crude Shrinks, High Sulphur Crude Up In July
more...


Product-Wise Consumption In July 2021
more...


Passenger Vehicles ,Two Wheelers Register Impressive Sales
more...


PSU Oil Marketing Companies, Shell Expand Marketing Infrastructure During Covid-19.
more...


Self-Sufficiency In Petroleum Products
more...


Story Behind Downgrading of India’s GDP
more...


ONGC’s Short Term Action Plan
more...


Indian Drilling Rig Count Up
more...


Recovering Economic Activity To Boost World Oil Demand, But Problem Areas Persist
more...


Impressive Growth In Passenger Vehicles,2 Wheelers
more...


Global Rig Count Up
more...


Prices In Indian Basket Of Crude In July 2021
more...


Capital Expenditure of PSU Oil Companies Moves At A Fast Pace
more...


Industry Consumption Trend Analysis
more...


Petroleum Products: Marginal Increase in Import, Big Jump in Exports In June 2021
more...

Tenders [FREE Access]
Cairn India
more...