GAIL wants a chunk of IOCآ’s deal for South Pars

Vol 8, PW 17 (17 Nov 04) Midstream & Downstream

GAIL chairman Banerjee is also angry with Indian Oil for excluding other Indian state-owned companies from its unilateral agreement to develop one of the South Pars development phases for LNG export to India.

This unilateral act of IOC is a clear violation of the consortium approach decided by the oil ministry, Banerjee writes to oil secretary Sushil Tripathi in early November. I would strongly urge the ministry to direct IOC to adhere to the consortium approach and the opportunity with Petropars should be pursued by all four state-owned oil and gas companies with their roles and responsibilities clearly worked out.

Banerjees letter comes just two days after news emerged on 1st November that Indian Oil had signed a $3bn deal with Petropars of Iran to develop one of the 30 phases of the 500-sq mile South Pars gasfield, which contains an estimated 436-trillion cubic feet of gas reserves. Included in the deal is a proposal to produce 9m t/y LNG, which Indian Oil will market in India.

In his letter Banerjee pointedly refers to a January 2003 oil ministry directive that orders Indian state-owned oil companies to adopt a consortium approach while pursuing opportunities in Iran to avoid unnecessary competition with each other. According to Banerjee, the directive clearly states that in any business area, one of the state-owned companies should function as operator with the others as partners.

On 8th April, for example, Banerjee said the ministry directed GAIL not to bid in licensing rounds for exploration and production acreage in Iran, saying this should be left to OVL. Banerjee insists that OVL - not IOC - should have been the lead company for the development of the South Pars block and that GAIL - not IOC - should have been entrusted with the LNG component of the project.