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Mr Subir Raha

Richa Mishra

New Delhi, Feb. 10 The Hinduja Group and ONGC Videsh Ltd (OVL) hope to reach a general agreement with Iran for developing oil and gas fields in that country by the end of this month.

OVL, the overseas investment arm of ONGC, and the Hinduja Group are looking at joining the development of the South Pars phase 12 gas fields and the Azadegan oil field in Iran. In return, Iran has been offered stake in a liquefied natural gas (LNG) terminal and refinery project in India.

“Draft memorandum of understanding has already been exchanged and we are hopeful of reaching a general agreement and initiate a due diligence of the fields during the next round of talks expected by the end of this month,” Mr Subir Raha, Executive Vice-Chairman, Hinduja Group India, told Business Line.

The tripartite talks are expected to take place in Iran. The total project cost involving upstream (fields in Iran) and downstream (LNG and refinery project in India) segment is roughly $20 billion.

During the recent talks held in New Delhi between senior executives from OVL and Hindujas’ Ashok Leyland Project Services, and representatives of Iran’s state-run Petropras and Naft Iran IntertradeCo Ltd (NICO), a subsidiary of National Iranian Oil Co, the vital issue of cost has been sorted out. “Sharing of development cost is a critical component of such deals, and since the methodology for this has been agreed upon, the other issues will follow,” he said.

The parties have agreed that the actual contracted cost will be taken into account. By taking the actual contracted cost it means that the cost at which the works will be awarded, even if it happens to be higher than the estimated cost, will be taken. The cost will be shared by OVL and its Indian partners. The tripartite negotiations with Iran and the agreement between Hinduja Group and OVL on the project do not infringe upon each other, Mr Raha said.

The two Indian partners will be working on the equity structure, once the deal is finalised, he said. The Indian partners have offered the Iranian firm an equity stake in its proposed refinery and a LNG gas terminal in Kakinada. ONGC plans to build a 300,000 barrels-a-day refinery in Andhra Pradesh and a 7.5 million tonne LNG terminal in Karnataka. The Hindujas are keen to participate with ONGC in this project.

OVL-Hinduja Group had signed a memorandum of understanding in 2006 for collaboration in the oil and gas sector. In December last year, the OVL board had given its nod for inking an MoU with the Hindujas for the projects in Iran adopting a collaborative approach.

Azadegan oil field is one of the biggest oil fields to be discovered in the world during the past 30 years and its reserves have been estimated at 33 billion barrels. The South Pars gas field contains about 50 per cent of Iran’s gas resources and is regarded as the largest offshore gas field in the world.

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