ONGC Videsh, Hindujas may set up JV to invest in Iran

NEW DELHI: A new mega oil deal is now in the making in Iran. This time, ONGC Videsh (OVL), the overseas investment arm of ONGC and the Hinduja group are in talks to seal a partnership with Switzerland-registered NICO, a subsidiary of the National Iranian Oil Company (NIOC). The OVL-Hinduja group JV proposes to pick up 50% stake in one of the world’s largest gas fields and onshore oil block — South Pars and Azadegan.

Azadegan oil field is one of the biggest oil fields to be discovered in the world during the past 30 years. The field is located 80 km west of Ahvaz and its reserves have been estimated at 33 billion barrels. The South Pars gas field (divided into 28 phases) contains about 50% of Iran’s gas resources and is regarded as the largest offshore gas field in the world.

The property is jointly shared by Iran and Qatar. The Iranian share of this field is an area of 3,700 square km and, according to conducted estimations, consists of 14.2 trillion cubic metre of gas (equal to 8% of the world’s resources) and more than 18 billion barrels of condensates.

The development cost for each phase of the South Pars gas field is estimated around $1 billion. An MoU for the deal has already been inked between NICO and the Hinduja group. OVL is set to take a final decision on the proposed joint venture at its board meeting slated to be held on Wednesday.

The petroleum ministry has already given in its consent to OVL to go ahead with the collaboration. The finance ministry’s views on the proposal are also likely to be tabled at the OVL board meeting.

OVL and the Hinduja group, which had initially planned to float a joint venture company on the lines of ONGC Mittal Energy, are now going in for a project-specific JV restricted to the Iranian projects alone. Sources said ONGC was not keen on an overarching JV.

The proposed JV is likely entail a majority stake for OVL in the venture with a 51% stake and 49% by the Hinduja group. The idea behind the proposed JV is to capitalise the relations of the Hinduja group in countries like Iran, Qatar and Kuwait which could offer oil equity to India.

NICO, which is the operator and is holding management control in the Iranian blocks, is a 100% subsidiary of NIOC, the state-run Iranian oil company. NICO in turn has floated two subsidiaries — Petropars and Petco — for its operations in Azadegan and South Pars fields.

Petropars has earlier planned to collaborate with Indian state-run oilcos IOC and GAIL to develop a petrochemical complex and refinery. However, the MoU failed to materialise with the two parties failing to reach a formal agreement.

India, which has oft reiterated its bilateral energy links with Iran given the geographical proximity of the energy rich country, has however, till now failed to formalise any major deal. OVL, however, has made a beginning with the Farsi oil block where it has also made a discovery.

The Hindujas are understood to have signed the MoU with NICO in August this year and are time bound to translate this into a heads of agreement if the deal is to go through. It is also learnt that unlike most gas contracts in Iran, which does not allow for direct oil equity stakes, the MoU allows the Indian oilcos to export its share of oil and gas to the Indian market.