ONGC Videsh Ltd. (OVL), the overseas investment arm of state-owned Oil and Natural Gas Corporation (ONGC), had in 2008 discovered a giant gas field in the Farsi offshore exploration block, business-standard.com reported.

OVL and its partners had offered to invest up to $11 billion for development of the discovery, which was later named Farzad B.

After sitting over OVL’s proposal for years, the National Iranian Oil Company (NIOC) informed the firm in February this year about its intention to conclude the contract for Farzad B development with an Iranian company, sources with direct knowledge of the development said.

OVL, however, continued its engagements with the NIOC over the development of the field and sought terms and conditions of the proposed contract for its evaluation, they said, adding that Iran has so far not responded to the Indian firm’s request.

Farzad B holds total reserves of around 21.7 trillion cubic feet of which around 60 percent is recoverable, and production is slated to be around 1.1 billion cubic feet per day.

Sources said unconfirmed information suggests that Iran has identified a local firm for the development of the field, but OVL has not yet given up hopes and continues to chase Iranian authorities for the contract.

The 3,500-square-kilometer Farsi block sits in water depth of 20-90 meters on the Iranian side of the Persian Gulf.

OVL, with a 40 percent operatorship interest, signed the exploration service contract (ESC) for the block on December 25, 2002. Other partners included Indian Oil Corporation (IOC) with a 40 percent stake and Oil India Ltd. (OIL) holding the remaining 20 percent stake.

OVL discovered gas in the block, which was declared commercially viable by the NIOC, on August 18, 2008. The exploration phase of the ESC expired on June 24, 2009.

The firm submitted a master development plan (MDP) of Farzad B gas field in April 2011 to the Iranian Offshore Oil Company (IOOC), the then-designated authority by the NIOC for development of Farzad B gas field.

A development service contract (DSC) of Farzad B gas field was negotiated till November 2012, but could not be finalized due to difficult terms and international sanctions on Iran.

In April 2015, negotiations restarted with Iranian authorities to develop Farzad B gas field under a new Iran Petroleum Contract (IPC). This time, the NIOC introduced Pars Oil and Gas Company (POGC) as its representative for negotiations.

From April 2016, both sides negotiated to develop Farzad B gas field under an integrated contract covering upstream and downstream sectors and industries, including monetization/marketing of the processed gas. However, negotiations remained inconclusive.

Meanwhile, on the basis of new studies, a revised provisional master development plan (PMDP) was submitted to POGC in March 2017, sources said, adding that in April 2019, NIOC proposed development of the gas field under the DSC and offtake of raw gas by the NIOC at landfall point.

However, due to the reimposition of US unilateral sanctions on Iran in November 2018, technical studies could not be concluded which is a precursor for commercial negotiations.

The Indian consortium has so far invested around $400 million in the block.

Rasouli made the announcement in a meeting with Ambassador of India in Tehran Gadam Darmendra in Tehran, railnews.ir reported.

The Iranian official stressed that the development of cooperation between Tehran and New Delhi “guarantees comprehensive development of Iran-India relations.”

Rasouli, also the Deputy Minister of Roads and Urban Development, referred to the long history of Tehran-New Delhi relations and said talks of the two sides about the promotion of combined transport have been very much “satisfying”.

The Chabahar-Zahedan railway project connects Iran’s southeastern port city of Chabahar in Sistan-Baluchestan province to the eastern city of Zahedan near the border with Afghanistan and Pakistan.

Head of Iran’s Plan and Budget Organization Mohammad Baqer Nobakht during a visit to Sistan-Baluchestan in May said that the project will be inaugurated by June 21, 2021, Financial Tribune reported.

Rasouli stated that presently necessary preparations have been made for activation of cooperation between the two countries in the international North-South, and East-West Corridor of the Caspian Sea, describing it “a good opportunity and advantage to reduce costs of goods transport” via those rail routes.

Referring to the significance given by the Leader of the Islamic Revolution to the benefits of developing Iran’s rail transport, Rasouli said the development of the country’s rail transport is a “non-stop” process.

In September 2019, Ayatollah Khamenei permitted withdrawing a sum of $300 million from the National Development Fund for completing a railroad project which is to be part of a plan for the development of the Makran coast in southeastern Iran.

Rasouli further voiced Iran’s railway’s readiness to cooperate with its Indian counterpart in the field of freight transportation in the region and international corridors.

He also said that a five-country meeting is to be held on July 28 between Iran, India, Russia, Ukraine, and the Republic of Azerbaijan to explore ways to develop cooperation between the five countries in various fields of transportation.

Meanwhile, the Indian Embassy wrote in a Twitter message on Monday that during the meeting, the Iranian side stated that “vested interests were behind recent reports that Iran excluded India from Chabahar-Zahedan railway.”

The Indian ambassador told Rasouli in the meeting that the repeated visits to Tehran by Indian Prime Minister Narendra Modi and his four times meetings with President Hassan Rouhani indicated that leaders of the two countries are very much determined to develop comprehensive relations between the two capitals.

“India attaches great importance to the development of its relations with Iran and our goal is to maintain our relations, especially in the field of completing the transport infrastructure with Iran,” said the ambassador.

Noting that this year is the 70th anniversary of the signing of a memorandum of friendship between Iran and India, he added, New Delhi gives great importance to fulfilling of bilateral cooperation with Tehran in the field of infrastructural activities.

He further expressed satisfaction over good progress made during Iran-India cooperation in Chabahar port during the past 18 months.

He suggested that setting up representative offices of the two countries in the field of transportation would pave the way for further activity of Indian companies in Iran.

Ambassador Darmandra added, in order to develop rail cooperation between the two countries, a delegation from Iran should travel to India to technically review the status of wagon and locomotive production, and a delegation from India should come to Iran to be briefed on the latest status of producing rail transport fleet.

On the sidelines of the meeting, the Indian ambassador and his accompanying delegation toured various sections of a center for the development of the railways of the Islamic Republic of Iran.

A deputy to Iran’s Ports and Maritime Organization, Farhad Montaser, called the story “totally false because Iran has not inked any deal with India regarding the Zahedan-Chabahr” railway, Al Jazeera reported.

“Iran has only signed two agreements with Indians for investment in Chabahar: One is related to the port’s machinery and equipment, and the second is related to India’s investment to the tune of $150 million,” Montaser was quoted as saying by IRNA.

“We had a list of Indian investments in Chabahar port, which also included the issue of Chabahar railway infrastructure and the railway, but during the negotiations, it was not agreed upon.”

He added, “Sanctions have nothing to do with the Iran-India cooperation in Chabahar.”

The Hindu newspaper reported on Tuesday that the Iranian government decided to proceed with the long-stalled rail project without India’s participation.

A track-laying ceremony for the Chabahar-Zahedan rail line was held last week. It will eventually stretch to Zaranj on the Afghan side, enabling hassle-free trade and movement.

The Indian consultancy IRCON has pledged to provide all services and funding for the project, estimated at about $1.6 billion, according to the Hindu report.

As India has no longer been importing oil from Iran due to illegal sanctions imposed by the United States following its unilateral withdrawal from the 2015 Iran nuclear deal in 2018, the Indian lender is in talks with importers to use the mechanism for other imports, according to the bank’s A.K. Goel, Business Standard reported.

“In the last few months, there has been no fresh inflow into the payments account. We are exploring the opportunity to import other commodities, such as fresh fruits, under the mechanism. Our role here is not an only settlement but also to facilitate trade between India and Iran,” said Goel.

Rupee-rial trade mechanism

In the wake of US sanctions, India cannot engage in dollar-denominated trade with Iran. Hence, a special rupee-rial trade mechanism has been put in place, which is a barter-like arrangement by the two countries to carry out trade without using international currencies like the dollar.

Under this, oil refineries from India deposit funds into designated banks to import oil from Iran. These rupee funds are then used to clear dues of traders that export from India to Iran.

UCO Bank and IDBI Bank are the two Indian banks that support this payment mechanism, and such deposits make up for a bulk of low-cost deposits for the lenders.

However, even as oil imports have dried up, exports have not fallen as much.

According to government data, imports from Iran stood at nearly $13 billion in 2018-19, which came down to nearly $1.35 billion between April and January in 2019-20. In contrast, the fall in exports was much less. Exports to Iran stood at $3.5 billion in 2018-19, which fell to $2.80 billion between April and January of this financial year.

Rice, tea, sugar, and pharmaceutical products are key items India exports to Iran, with rice accounting for the largest share.

Iran has been an important trade partner for India.