Pradhan flying to Iran on April 6 to energise oil ties
In a fine balancing act, India will be sending Oil Minister Dharmendra Pradhan to Iran early next month, days after Prime Minister Narendra Modi’s visit to the Middle East nation’s rival Saudi Arabia. Pradhan is likely to visit Tehran on April 6-7 and Modi’s two-day bilateral visit to Riyadh will begin from April 2, official sources said.
Accompanied by ONGC Videsh Ltd Managing Director Narendra K Verma and Indian Oil Corp (IOC) Chairman B Ashok, Pradhan’s visit is aimed at engaging with leadership of the oil and gas rich nation that has just come out of international sanctions.
This will be the first visit by an Indian minister since the US and western sanctions were lifted against Iran in January. Within days of that Chinese President Xi Jinping travelled to Tehran, signing 17 accords and agreeing to increase bilateral trade by more than tenfold to $600 billion in the next decade. And to avoid infuriating Saudi Arabia, China’s largest oil supplier, Xi visited Riyadh and Egypt before heading to Tehran. New Delhi is looking to increase engagement with sanction- free Iran by raising oil imports and possible shipments of natural gas. It also wants rights to develop Farzad-B gas field in the Persian Gulf that was discovered by OVL.
Sources, however, said a deal for field may not be signed during Pradhan’s visit as Iranian Parliament, Majlis, is yet to approve new Iran Petroleum Contract (IPC) under which the Farzad-B field is to be given to OVL-led consortium. IPC ends two-decade old buyback system that prevented foreign companies from booking reserves or taking equity stakes in Iranian companies. Under some circumstances, the new model allows reserves to be booked, but foreign companies would still not own oilfields.
While previously foreign firms were paid a fixed fee for discovering and bringing to production an oil and gas field, the new model raises their profit by grading the fee based on the risk of the fields, allow contracts to last for up to 25 years and no ceiling on capital expenditure.
Foreign firms are to be paid a fee per barrel and they will also be entitled to an increase in profits in face of dramatic oil price fluctuations. Sources said Pradhan is likely to push for early conclusion of the contract for Farzad-B field as well as better terms for crude oil imports. Indian firms have so far shied away from investing in Iran for the fear of being sanctioned by the US and Europe. The same was deterring New Delhi from claiming rights to invest nearly $7 billion in the biggest gas discovery ever made by an Indian firm abroad. But after the lifting of sanctions, India is making a renewed pitch for rights to develop 12.8 trillion cubic feet of gas reserves OVL had found in 2008.