OVL may sign pact with Iraq for oil block

ONGC Videsh (OVL), the overseas investment arm of Oil and Natural Gas Corporation (ONGC), is likely to sign agreement in next couple of months for an oil block in Iraq that was awarded to it by the erstwhile Saddam Hussein regime.

"Negotiations on the contract for block 8 in Western Dessert have been concluded and the concession agreement is ready for signing," a source in know of the development said.

OVL had commenced seismic survey on the block that the Saddam Hussein regime awarded to it in November 2000, before the US-led war on Iraq. The block, which is on the Iraq and Kuwait border, has a reserve of about 645 million barrels, of which 54 million barrels was recoverable.

The company will hold 100 per cent interest in the block and will invest $250 million in initial exploration phase.

The contract will be similar to the one China National Petroleum Corporation (CNPC) signed last month for developing Al-Ahdad oilfield in central Iraq. "It will be a service contract wherein OVL will be paid about 18 per cent rate of return on the investment it makes in finding and producing oil from block 8," the source said.

OVL can take its fee in kind - that is in form of crude oil. "OVL can practically ship of the crude oil produced from block 8 to India," he said.

It would act as the operator of the field until it recoups all its costs and set up a joint operating company with the local operator to take over once development costs have been repaid.

Indonesia's Pertamina and state Petrovietnam, who signed two contracts in 2002 for block 3 in the Western Desert and Amara oil field in the south, respectively, are also involved in renegotiations of oil contracts with Baghdad.

Iraq has also pre-qualified OVL for its tender of eight oil and gas fields.