ONGC will soon be able to develop gas blocks in Iran with the National Iranian Oil Corporation (NIOC) approving the commercial viability report prepared by ONGC Videsh Ltd (OVL) and its consortium partners on the discovery made in Iran's Farsi offshore block.

OVL and its partners Indian Oil Corporation and Oil India Ltd had submitted the commercial viability report for the approval of NIOC in December last year. The block is estimated to hold recoverable gas reserves of about 12.5 trillion cubic feet.

The ONGC consortium  has already invested $90 million in exploration in the field and plans to invest around $3 billion to develop the gas field. The block also holds reserves of over one billion barrels of oil.

Iran and India, meanwhile, have decided to improve banking and insurance linkages to encourage two-way investments.

During a two-day meeting of the India-Iran joint commission, co-chaired by external affairs minister Pranab Mukherjee and Iranian economic affairs minister Shamseddin Hossein, the two sides also decided to extend the scope of their economic and trade relations.

"In the field of energy, there was an agreement to use the capabilities and capacities of Indian corporations in the exploration of oil and gas in Iran and take necessary measures accordingly," Hossein said.

OVL had won the bid for the 3,500-sq-km Farsi offshore block early in 2002 and signed the exploration service contract (ESC) with NIOC on 25 December 2002. OVL is the operator of the block with a 40 per cent participating interest, while IOC holds another 40 per cent and by Oil India the remaining 20 per cent stake.

India, which imports nearly 70 per cent of its oil requirements, has intensified its efforts to boost oil production abroad to make up for stagnating local output.
 
ONGC expects the fall in crude prices to ease its under-recoveries and subsidy burden.

AS steep increase in under-recoveries and the subsidy burden in Q2 had led to a decline in ONGC's net profit. Its Q2 standalone net profit was down 5.67 per cent at Rs4,808.41 crore against Rs5,097.48 crore in the same quarter last year, even though standalone net sales rose to Rs17,499.62 crore from Rs15,413.92 crore in the same period last year.