ONGC-Hinduja may invest $10 b in two Iran gas fields

New Delhi: ONGC and Hinduja Group may invest $10 billion for developing oil and gas fields in Iran.

Mr R.S. Sharma, ONGC Chairman and Managing Director, told newspersons here today that, “the development of South Pars gas field Phase-12 and Azadegan oil field will cost $5 billion each.”

ONGC’s overseas investment arm, ONGC Videsh Ltd, and Ashok Leyland Project Services Ltd – a unit of Hinduja Group, plan to sign an MoU with Naftiran Intertrade Co and Petropars Ltd.

Due diligence today

“We will begin due diligence for the two fields on Thursday,” he said, adding that “It will be a service contract. We will be assured of oil and gas as our remuneration.” ONGC was expecting a return of at least 20 per cent on the investment in the fields.

“Earlier, there were some concerns like the service contractor having to bear any cost escalations happening after the budget for the field development was fixed. Now, they have made some changes and the budget will be frozen only after award of tenders. This takes care of the cost escalation issue,” he explained.

The Azadegan oil field may hold reserves of as much as 40 billion barrels, he said. “Our first round of discussions has been very positive. We are proceeding cautiously but steadily. The areas have huge potential,” he added

Kakinada project

On the domestic front, merchant banker SBI Caps is likely to submit a feasibility report on ONGC’s Rs 25,600-crore export-oriented refinery-cum- petrochemical project at Kakinada. The report is expected in two weeks.

Meanwhile, the company has sought incentives, including land free of cost from the State Government to make the project viable. Besides land, ONGC also wants exemption from sales tax on petroleum and petrochemical products, free power and water supply during the construction phase and road and rail connectivity.

In fact, Hindujas have evinced interest in picking up a majority stake in the refinery project. ONGC’s subsidiary Mangalore Refinery is to hold 26 per cent stake in Kakinada Refinery Petrochemicals Ltd, the company set up to implement the refinery project.

IL&FS is to hold 51 per cent stake and the balance is expected to with an Andhra Pradesh Government-appointed agency.