ONGC Videsh revised its plan to develop Iran’s Farzad-B natural gas block
India’s largest oil and gas explorer is looking to invest into Iran as the country looks for ways to meet its growing demand for oil and natural gas. ONGC Videsh submitted a revised plan to the Iranian government for more than $3 billion of development in the Farzad-B natural gas field over the next five years, according to Bloomberg.
India has been weighing investment in Iran worth up to $20 billion. In addition to oil and gas exploration, the South Asian nation has considered petrochemical plants, gas processing facilities and port expansions, including the industrial hub of Chabahar, Oil Minister Dharmendra Pradhan said last year during a visit to Tehran.
Output from Farzad-B could range from 1.0 to 1.6 billion cubic feet of gas per day, according to ONGC Videsh Managing Director N.K. Verma.
India’s growing population and rising middle class have marked it as “the next China” in terms of demand growth. India has been looking to expand its oil and gas exploration development abroad in order to meet as much of its own demand as possible, rather than buying from other countries.
Iran ramping up natural gas production
Iran has been looking for foreign partners to help develop the countries oil and natural gas assets since the end of international sanctions on the Islamic Republic. Last week, Iranian Oil Minister Bijan Zangeneh said Iran would ramp up natural gas production from its South Pars field, which it shares with Qatar.
Iran has made increasing natural gas production a top priority to meet domestic shortages. The country signed a preliminary deal with France’s Total (ticker: TOT) in November to develop its South Pars II project.
Total was the first Western energy company to sign a major deal with Tehran since the lifting of international sanctions.
Collectively, the offshore field is believed to hold the world’s largest reserves of natural gas, according to the EIA. Qatar is also working on increasing production from its portion of the field as well.
Exporters are expecting strong natural gas markets in coming years
The ramp up in natural gas production is coming despite relative weakness in natural gas prices, but many are betting markets will soon tighten.
“There are no analysts who can say when demand for gas will wane. For oil, there are people who see peak demand in 2030, others in 2042, but for gas, demand is constantly growing,” said Qatar Petroleum CEO Saad al-Kaabi.
Prices are currently reacting to growing transparency in the market, according to Cheniere Energy (ticker: LNG) CEO Jack Fusco. “What you’re seeing is a supply-demand price reaction, which is what you’d expect when the market becomes more transparent, more liquid, more seasonal and less bilateral,” he said.
LNG contracts have been predominately long-term and set to favor suppliers. Many of the world’s major natural gas demand centers are looking for ways to change that, however.
A group representing roughly one-third of the world’s LNG purchasing power recently gathered to form a group designed at lobbying for more attractive contracts for buyers. Korea Gas Corp. (KOGAS), Japan’s JERA and China National Offshore Oil Corp. (CNOOC), formed a group to exchange information and “cooperate in the joint procurement of LNG.”
“When you purchase LNG in a long-term contract, you have to buy. But when demand comes down due to issues like nuclear reactors restarting, you need to resell,” said Nobuo Tanaka, chairman of the Gastech Japan 2017 Consortium and former executive director at the International Energy Agency.
“When caught with this kind of changes, we need some flexibility or the spot market in order to adjust the demand and supply situation in the short-term,” he told CNBC.
