NEW DELHI (Reuters) - Difficulties in securing funding will delay the ONGC’s deal to invest in Iran’s South Pars Phase 12 gas project, as global pressure on Tehran grows over its nuclear programme.
Banks are unwilling to fund the purchase of a 40 percent stake as Iran faces U.S. and United Nations economic sanctions, a source at the state-run oil explorer said on Wednesday.
“It is not that it is a closed chapter. It is very much on our table but we have to see to the funding issue,” the Oil and Natural Gas Corp source told reporters on condition of anonymity.
He said the company needed to transfer funds to Iran for sharing the cost of the gas field development.
“We have to spend money without violating sanctions... It is not easy.”
The source said internal funding was not suitable.
“We can not fund it through ONGC’s balance sheet as we keep scouting for attractive assets,” he said. “We need to have banks involved for transferring and to partly fund our share of development costs to Iran which is done in dollars.”
Last month India’s central bank Reserve Bank of India (RBI) clampdown on funding for payment of oil imports from Iran threatened to disrupt supplies of crude.
The RBI decision, taken weeks after U.S. President Barack Obama visited India, was praised by Washington, which said the move would reduce funds available to Tehran to support its nuclear activity, which the U.S. believes is aimed at building an atomic bomb.
“Yes it is because of slew of sanctions against Iran that ONGC is facing difficulty in sourcing funds for the project,” said N.R. Bhanumurthy, economist with the Delhi-based policy think-tank NIPFP.
“Since we are a part of United Nations and right now member of the Security Council, we have much more responsibilities than we had before January,” he added.
“We need to follow norms. India is planning a bigger global role in that context we might need to sacrifice something Iran could be one of them. It is the cost of India playing a major role in global context”.
India, which has U.S. backing for its bid for a permanent place on the Security Council, has voted against Iran on its nuclear programme at the International Atomic Energy Agency. Iran has made statements supporting an insurgency in Indian Kashmir.
With Western firms wary of investing in the Islamic state, Tehran has increasingly looked towards energy-hungry Asian countries for investment to help exploit its gas and oil reserves.
India imports about four-fifths of its crude oil needs, and is scouting for oil and gas assets abroad to meet growing fuel demand and to feed its expanding refining capacity.
ONGC is alive to the implications of any Iran investment.
“We signed the MoU in December 2009,” said R.S. Sharma, chairman of ONGC, on the sideline of an industry conference. “Thereafter, we have been in dialogue. We have to take care any initiative from us has to be in conformity with government policy.”
Last year the managing director of Petropars, the Iranian company that manages the gas project, said Indian firms had until December to finalise the deal and hoped it would be signed by the end of March 2011. He said development of the project was expected to cost $7.5 billion.
Editing by William Hardy