Fears of a war between Iran and Israel and re-emergence of the civilian nuclear deal with the US has put in danger various oil and gas projects India was eyeing in Iran as it searches for energy to feed a growing economy.
Projects worth over $20 billion, ranging from the decade-long Iran-Pakistan-India gas pipeline to various oil and gas exploration and production projects, are being re-considered, said officials in the Union Ministry of Petroleum and Natural Gas.
"Iran could ideally be a natural source to meet India's energy needs. Politics may however have a different say," said a senior official with Oil and Natural Gas Corporation, India's largest oil and gas company.
Iran, with 16 per cent of the world's proven gas reserves, has the world's second-largest reserves of gas.
While it may not always be feasible to bring the oil and gas to India as Iran does not allow foreign oil companies to own the oil and gas it produces. Indian companies, however, say that even the money it earns from the oil contracts is good enough for it to buy oil and gas from other countries.
India's demand for crude oil and gas is growing at over 12 per cent per year, but its domestic production of oil is stagnant. Experts expect the gap between demand and supply (demand is projected to be nearly 13 per cent higher than supply in 2012) to widen.
Gas production from existing fields in India are declining, while production from new fields such as of Reliance and ONGC in the Krishna-Godavari basin are yet to start production.
Petroleum Minister Murli Deora had announced last month that he would travel to Tehran in July and sign the $7.5-billion IPI pipeline contract, which would increase availability of gas in India by a third. The project was first conceived in 1994, and has since been delayed due to reasons ranging from gas pricing to security concerns to foreign policy issues.
Deora's visit to Tehran may now be delayed due to increased security threat (bombings in Karachi) and re-emergence of the Indo-US deal. The US is opposed to the IPI pipeline after it imposed sanctions against Iran, alleging that Tehran is secretly pursuing a nuclear weapons programme.
When contacted Deora declined to comment.
ONGC Videsh, the overseas investment arm of government-owned ONGC, and the London-based Hinduja group, had also lined up investments of around $10 billion to develop part of Iran's South Pars field, one of the largest gas fields in the country with in-place reserves of around 500 trillion cubic feet.
The Reliance Industries-operated field in the K-G basin has reserves of 11.2 tcf.
OVL, along with its Indian partners Indian Oil and Oil India, is operating the Farsi block in Iran, in which it discovered both oil and gas early last year. The consortium has submitted a proposal to develop and produce the oil and gas to the Iran government.
"All the proposed projects are held up. The Iranians are not responding and we are also going slow," said another official in the petroleum ministry. India imports 78 per cent of its crude oil requirements.
The government has projected import dependence to rise to around 90 per cent in the next five years if domestic production remains at current levels.
Indian companies have not yet given up hope saying they cannot afford to ignore Iran. "If we can go to Nigeria and Sudan where there is always a war-like situation, we can also go to Iran. The country needs the oil and gas and we have to take the risk," said a senior ONGC official.
French company Total, the world's fourth largest oil company, pulled out from a project that involved developing Phase 11 of Iran's South Pars field. The company said it could not immediately invest in Iran as it was "too risky", Bloomberg reported on July 10.
