NEW DELHI (Dow Jones Newswires), Jan. 12, 2011
Oil & Natural Gas Corp. expects further delays in signing a deal with Iran's state-run Petropars to develop phase 12 of the South Pars gas field as U.S. sanctions on Iran are making it hard to secure funding, a senior company official said Wednesday.
"We are still negotiating with Petropars. We have to spend money on the project without violating U.S. sanctions, which isn't easy," the official, who didn't wish to be named, told reporters on the sidelines of an industry event.
The South Pars gas field, owned jointly by Iran and Qatar, is the world's largest gas reservoir and contains about half of Iran's gas resources. Iran wants to boost its natural gas output and exports while India is looking for secure fuel supplies to sustain its rapidly growing economy.
Despite its robust cash reserves, ONGC is seeking loans for the phase 12 development project, which is likely to cost about $7.5 billion.
"ONGC has the funds. But we can't spend it all on this project, as we keep scouting for attractive assets overseas," the official said. He added that ONGC also needs to involve banks to transfer its share of the development cost to Petropars. This is a difficult process because of curbs placed by the U.S. on transactions with Iran.
The Reserve Bank of India said late last month that all trade-related payments with Iran had to be cleared outside the Asian Clearing Union. The ACU is a clearing house arrangement between nine central banks, including Iran's. All trade-related payments are settled every two months on a net basis through the ACU. But the U.S. has said the system is opaque and that Tehran could be using it to finance its alleged nuclear weapons program.
Iran is the second-biggest supplier of crude to India after Saudi Arabia, accounting for about 14% of the country's oil import bill.
Separately, ONGC's director of exploration, D.K. Pande, told reporters that the company may have to develop its oil block in the Krishna Godavari basin off India's east coast on its own, as talks with foreign partners have been inconclusive.
"Talks have been lingering on. We were thinking of finalizing a partner for the block in Krishna Godavari basin by January, but it looks like we have to do it alone," Pande said.
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