Indian consortium strikes oil in Iran

A consortium of Indian oil companies, led by ONGC, has struck it rich in the Persian Gulf: a find of an estimated 10 trillion cubic feet of natural gas and one billion barrels of oil in the Farsi block. This development comes in the wake of US warnings against making military and energy deals with Iran. The consortium of Indian oil majors, led by ONGC Videsh (OVL), the overseas arm of ONGC, has IOC (40%) and OIL (20%) as members.

Pressure has been mounting on India to take a more cautious approach on Indo-Iran bilateral ties. The US had, in September 2006, extended the scope of economic sanctions under the Iran-Libya Sanctions Act, by which foreign companies making an investment of more than $20 million in one year in Iran's energy sector would be blacklisted. Although Indo-US nuclear deal has always had political overtones that had little to do with energy, it is difficult for energy-starved India to ignore the hydrocarbon potential of Iran. India has signed a $20 billion deal to buy Liquified Natural Gas (LNG) from Iran and is also pursuing a pipeline project along with Pakistan to bring Iranian gas to India.

The consortium of oil companies which began work in 2003 found the first traces of oil and gas in late 2006. Production from these fields is estimated to begin in another five years. As per the understanding with Iran, the Indian companies can buy back the oil and gas as well as earn a margin on their production.

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