Context: Recently, Iran has given the Farzad B gas field to Petropars, a domestic gas producer.

• The current deal will pave the way for daily production of 28 million cubic meter of gas over five years.
• Earlier, Iran decided to fund and develop a rail link under the second phase of the Chabahar Port on its own, where India was anticipating participation.

Farzad B Gas Field

• It is an offshore natural gas field located in Persian Gulf (Iran).
• In 2000, it was discovered by the ONGC Videsh Ltd (OVL) in the Farsi region, which is located between the Iranian and Saudi territories.
• In 2002, the exploration contract of the field was signed by Indian consortium comprising OVL, Indian Oil Corporation and Oil India.
• In 2009, the contract expired after declaration of commerciality of the field, based on the gas discovery, with reserves of more than 19 trillion cubic feet.

Iran decided to give the development of the infrastructure projects to local companies instead of giving them to India. These are the reasons behind the move

• Policy changes by Iranian government.
• Iran’s unpredictable finances.
• US sanctions.

The Indian oil consortium was trying to secure the contract for development of the field and around 75 per cent of the deal was finalised by May 2018, when the US unilaterally withdrew from the Joint Comprehensive Plan of Action (JCPOA) or also known as the Iran Nuclear deal and announced sanctions on Iran.

• In January 2020, Iran informed India that it would develop the field on its own and would like to involve India appropriately at a later stage.

Significance

• India needs gas and Iran is one of the best options geographically due to its close proximity in all the countries in the Persian gulf region.
• It could have improved India-Iran ties as the crude oil import from Iran remains impacted due to the US sanctions.

Impact on India

• The current deal in Iran comes despite India’s long-standing cooperation regarding the gas field and is indicative of the impact of the US sanctions on India-Iran energy cooperation.
• This is a setback for India’s energy ties with Iran as OVL had discovered the field and has been part of the ongoing cooperation. ONGC invested approximately USD 100 million.
• The Indian Ministry of External Affairs has not officially commented on the development yet.