New Delhi, September 16: ONGC Videsh Ltd and its partners Indian Oil Corporation and Oil India Ltd have dropped plans to develop an oil field in Iran after the discovery was found to be commercially unviable.
The joint venture of OVL, Indian Oil Corp and Oil India (OIL) had in 2006 made an oil discovery in the Farsi offshore block which was, in the initial estimates, thought to contain one billion barrels of reserves.
“The oil discovery has been found to be commercially unviable primarily due to high sulphur content in the oil,” an official in the consortium said.
The joint venture has informed the same to National Iranian Oil Company and have decided to abandon the project.
“The oil discovery has been held to be non commercial and we are not pursuing development of the discovery,” he said.
The three have, however, submitted a master development plan envisaging an investment of USD 5 billion over 7-8 years in developing a massive gas field they discovered in Farsi.
The discovery, which was subsequently named Farzad-B gas field, has inplace reserves of up to 21.68 trillion cubic feet (Tcf), of which recoverable reserves may be 12.8 Tcf.
OVL holds 40 per cent interest in the Farsi offshore block located in the eastern part of the Persian Gulf off the coast of Iran near the Saudi Arabian border and covers an area of 3,500 square kilometres.
The Indian consortium wants to liquefy the gas and ship it back home in the form of liquefied natural gas (LNG).
OVL, the overseas arm of state-run Oil and Natural Gas Corp, IOC and OIL have a service contract for the Farsi block where they will be reimbursed 35 per cent plus USD 90 million investment they made during the exploration phase.
If the consortia gets the developmental rights, they will be paid a 15 per cent rate of return over and above the investments they make.
In the commercial viability report to NIOC, OVL — the operator of the field — has said the least gas volume was 9.48 Tcf and the high-case estimate was 21.68 Tcf after independent studies by Fugro Robertson Ltd of the UK and ONGC’s Institute of Reservoir Studies.
OVL and IOC have 40 per cent stake each in the Farsi offshore block that was awarded to the consortium in 2002. OIL has the remaining 20 per cent.
The official said the commercial viability study of the gas discovery in Farsi block was completed in November 2007 while the report of commercial viability of the oil find was completed in April 2008.
Under Iranian rules, the project promoters are not allowed to take oil or gas out of the country. OVL had to fund all exploration operations that would be reimbursed only after ascertaining commerciality.
–Agencies