OVL and partners to ink contract to develop Iran gas field
Press Trust of India / New Delhi Jan 12, 2011, 19:50 IST
ONGC Videsh Ltd and its partners, Indian Oil Corp and Oil India, are in last lap of negotiations for developing the Farzad B gas field off the coast of Iran at an estimated investment of over $5 billion.
"There has been lot of discussions on the field development plan we submitted to Iranian authorities. Negotiations currently are centring around stitching together a services contract," an official in the consortium said.
The official said the Iranians still have some issues with respect to the development plan, but these are likely to be sorted out soon.
The consortium will get a fixed rate of return on the $5 billion it will invest on developing the field, as Iranian law prohibits foreigners owning oil and gas resources. Foreign companies develop the fields through service contracts.
Indians can buy Iranian gas from the remuneration they receive under the service contract.
The official said financing of the development plan would be looked into once Iran awards development rights to the Indian consortium. "We will cross the bridge when we reach there," he said.
National Iranian Offshore Oil Company had in October, 2010, stated that the contract to develop the Farzad B gas field in the Farsi offshore block would be signed soon.
OVL, the lead partner in the joint venture, had in April, 2009, submitted a master development plan for a massive gas discovery it had made in the Farsi offshore block. After the Iranians raised certain queries, it submitted a revised Master Development Plan (MDP) in August/September, 2010.
The discovery, which was subsequently named the Farzad-B gas field, contains in-place reserves of up to 21.68 trillion cubic feet (tcf), out of which the recoverable reserves may amount to 12.8 tcf.
"OVL had estimated the cost of developing the Farzad-B field at about $5 billion over a 7-8 year period," the official said, adding that the changes wanted by Iranian authorities have been incorporated in the plan.
OVL holds a 40 per cent participating interest in the Farsi offshore block, located in the eastern part of the Persian Gulf, off the coast of Iran. OIL holds a 20 per cent stake, while the remaining 40 per cent is held by IOC. The block covers an area of 3,500 square kilometres.
An earlier oil discovery made in the block in 2006, which was initially thought to contain one billion barrels of reserves, was later found to not have enough reserves for commercial exploitation.
The Indian consortium wants to liquefy the gas and ship it back home in the form of liquefied natural gas (LNG).
The consortium of OVL, IOC and OIL has a service contract for the Farsi block, under which the JV partners will be reimbursed for the entire $90 million investment they made during the exploration phase in the block, as well as an additional 35 per cent.
If the consortium gets the developmental rights, they will be paid a 15 per cent rate of return over-and-above the investment they make.
OVL said that as per independent studies by Fugro Robertson Ltd of the UK and ONGC's Institute of Reservoir Studies, the in-place gas reserves of the block amounted to 9.48 tcf in a worst case scenario, whereas in the best case, they could add up to 21.68 tcf.
Under Iranian rules, the project promoters are not allowed to take oil or gas out of the country. As such, the OVL-led consortium had to bear the risk of all exploratory operations and was only guaranteed reimbursement after establishment of commercial viability.
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ONGC Videsh Ltd and its partners, Indian Oil Corp and Oil India, are in last lap of negotiations for developing the Farzad B gas field off the coast of Iran at an estimated investment of over $5 billion.
