Iran Offers ONGC Videsh Stake in Oilfield

Iran has offered India a 20 percent stake in the producing Yadevaran oilfield on nomination basis to get New Delhi to buy five million tons per annum of LNG at 2.57 dollars per million British Thermal Unit (mBtu).

Iran's Energy Minister Bijan Zanganeh made the offer to Petroleum Minister Mani Shankar Aiyar when the two met on sidelines of the OPEC conference in Vienna last week.

Tehran agreed to give ONGC Videsh on nomination basis a 20 percent stake in Yadevaran oilfield, which is said to have a potential to produce 300,000 barrels per day, after an operator, most likely a Chinese firm, is selected through international bidding.

Sources said India insisted on getting liquefied natural gas at 2.40 dollars per mBtu, lower than $2.53 per mBtu price at which New Delhi is importing LNG from Qatar.

"With two sides sticking to their position, further round of discussions are slated between the national oil firms of the nations next month," they said.

The $2.40 per mBtu would translate to a delivered price of $3.30 per mBtu, a price considered attractive enough for power and fertilizer customers who have till date not bought any of the LNG being imported from Qatar.

Sources said OVL was to compete with multinational giants like Total and Petronas of Malaysia for getting 51 per cent stake in Yadevaran oilfield, recently renamed from Kush-Hossainieh, but Iran said it would give OVL a 20 percent stake from National Iranian Oil Company's (NIOC) 49 percent stake after the bidding round concludes.

Iran had previously offered to sell LNG to India from its South Pars field at $2.22 per mBtu, an offer New Delhi rejected outright as Tehran had offered lean gas (natural gas stripped of value added products like ethane-propane C2/C3 and LPG). It wanted rich gas to extract C2/C3 and LPG and was willing to pay no more than $1.72 per mBtu for the lean gas. It scaled up the price to $1.85 dollars per mBtu later.

Under the new deal, Gail and Indian Oil would buy up to five million tons a year of LNG from the National Iranian Gas Exporting Co under a 20-year contract beginning 2008-09.

The Indians would receive deliveries at Petronet LNG's Dahej terminal in Gujarat, which would be expanded to handle 10 million tons per annum by that time for the purpose.

"The offer price would remain fixed for first five years from the date of beginning supplies, after which the price would be renegotiated," sources said.

While Indian state-run firms would also invest in the liquefaction facility to be put up at South Pars gas fields, Iranian oil companies may also take up stake in LNG import and regasification terminal in India.

In the Yadevaran oilfield, OVL will get a fixed rate of return on the capital it along with the majority operator, to be selected through international tender, invests in bringing the field to production.

According to Iranian law, no equity oil (ownership of oil) by foreign firms is allowed and only a fixed rate of return is given to companies investing in oil exploration and production. With that money, the investing company may choose to buy oil.

The 20 percent equity is equivalent to 60,000 barrels per day of oil.