Farzad-B gas project is under threat of failure due to lack of funding

Azerbaijan , Baku, Feb. 28 / Trend T. Konyayeva /

Foreign companies, including Indian contractors, face the problem with financing of the project due to the development of the gas field Farzad-B in Iran. It is the main obstacle to its realization, Professor Reza Taghizadeh said.

"The Indian group, in order to move ahead with the proposal, is facing two major impediments: raising funds from the international money market and accessing the necessary technology know-how," Trend expert council member said via e-mail.

At present, India's Oil and Gas Corporation ONGC remains the main potential contender to develop an offshore gas field Farzad-B. As a part of the consortium, it has exclusive rights to exploration in the Farsi block of the Farzad-B field.

In October 2010, Iran announced the prompt signing of a contract with a foreign company to the amount of $5 billion to develop this field; the name of the contractor was not specified, h owever.

The s tatement was made after many Western oil and gas companies refused working in Iran because of sanctions against Tehran due to its nuclear program.

The potential developers of Farzad fields are expected to turn its natural gas into liquefied natural gas (LNG) and to export LNG to India.

The share of ONGC and Indian Oil Corporation companies to develop the Farsi block is 40 percent, the remaining share is owned by Oil India Ltd.

Iran had initiated talks with a group of Indian companies to develop the Farzad-B gas field - part of Farsi Block in 2010.

"According to Iran, the Indian group recently updated their interest and pledged to submit their revised proposal in the next few months. The talks have not yet reached a stage in which even the signing of a memorandum of understanding between the two sides has materialized," he said.

Because of the sanctions imposed against Iran, securing the $5 billion that is needed to develop the field in the current political climate is almost impossible, he said.

"India, China and Turkey have entered this pass before, but because of the same reason were forced to withdraw their offers," he said.

There are difficulties in the consistent increasing of investments in the key industries of gas, oil, petrochemical, metallurgical, and construction in Iran. Inflows are insufficient to maintain the desired dynamics of the industrial development of Iran. Many people consider the sanctions of Western countries as a serious obstacle.

In 2010 the U.S. Congress and Foreign Ministers of all EU countries approved the introduction of additional unilateral sanctions aimed mainly against the energy, banking and financial sectors of Iran.

The r estrictions imposed by the EU include the ban on the sale of equipment and technologies, and services to Iran's energy sector. The new investments in Iran's energy sector as a whole are also banned.

Iran managed to attract $2.7 billion of direct investments during the 10 months of 2010 (March to December). Therefore, managing $5 billion for one single project is highly unlikely, he said.

India , of course, needs Iran's oil and also its gas. But the main problem is that under the current circumstances, Iran cannot produce more natural gas than its own domestic need, let alone export gas to Europe or India, the expert said.

According to BP, as of late 2010, gas reserves in Iran are 29.61 trillion cubic meters (second in the world after Russia). The average gas consumption in Iran is more than 500 million cubic meters per day.

Producing LNG is even more difficult since the U.S. firms control the needed technology and hold the royalty rights. There is not even one single LNG production project that Iran has yet managed to take off the ground, he said.

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