ONGC Videsh may bid for Iran's Farzad gas field under new deal

ONGC Videsh Ltd (OVL), the offshore arm of Oil and Natural Gas Corporation Ltd, is keen to develop the Farzad-B gas find in Iran, which is now open to international competition after Iran repacked the partnership deal.

The new proposal offers more flexibility on cost recovery and capital expenditure, which makes it attractive for ONGC, reports pointed out.

OVL, along with other Indian companies Indian Oil Corporation and Oil India, had made the Farsi (renamed Binaloud) discovery in 2008. OVL, however, held off from developing the field because of US sanctions on Iran.

Also, while OVL had started exploration as a service contractor, Iran's old rule did not give explorers any claim on the discovery.

Also, under the earlier proposed deal for developing the field, the return on investment (RoI) was insufficient to attract investment.

With the West lifting sanctions, Iran is now open for business and the Farsi block with estimated in-place reserves of 21.68 trillion cubic feet (tcf), including 12.8 tcf of gas and 212 million barrels of condensate that are recoverable, the block may seem attractive.

Sources said, under the new model, an international oil company can participate in all segments of the upstream business - exploration, development, and production.

While the international oil company will help manage the projects, it will not have ownership of the reserves. But the company will be paid a share of the project's revenue in installments once production starts, the sources said.

The new Iranian model, among other things, offers more flexibility on cost recovery and capital expenditure.

OVL has, meanwhile, acquired a 25-per cent stake in the Satpayev offshore block in the Pre-Caspian Basin in Kazakhistan, which holds about 4-5 per cent of total world's reserves of oil and gas.

This block spreads over an area of 1,481 sq km and located in the shallow waters of the northern part of Caspian Sea. The geological and geophysical surveys indicated good prospects in the block.