ONGC Videsh Ltd and its partners Indian Oil Corp and Oil India Ltd will invest about $5 billion in developing a massive gas field they discovered in offshore Iran.
OVL, the lead partner in the three-way joint venture, in April this year submitted a master development plan for the gas discovery in the Farsi offshore block, OIL said in its red herring prospectus for an initial public offering (IPO) scheduled to open on September 7.
The discovery, which was subsequently named Farzad-B gas field, has in-place reserves of up to 21.68 trillion cubic feet (Tcf), of which recoverable reserves may be 12.8 Tcf.
"Current estimates for the cost of developing the Farzad-B offshore gas field pursuant to the master development plan submitted by the consortium is about $5 billion over a 7-8 year period, which we do not expect would begin during 2009," it said.
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.
However, the 2006 oil discovery in the block, which was in the initial estimates thought to contain one billion barrels of reserves, did not have enough reserves for commercial exploitation, OIL, which holds 20 per cent interest in Farsi, said. "The oil discovery was held to be non-commercial."
"The commerciality study for the gas discovery was submitted to the National Iranian Oil Company (NIOC) in December 2007 and accepted by the NIOC in September 2008, whereupon the gas field was named the Farzad-B offshore gas field," OIL said.
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The approval, however, did not include any timeline or deadlines for further discussions.
"In the event that the NIOC and the consortium fail to reach an agreement in respect of the master development plan for the Farzad-B offshore gas field within six months from October 1, 2008, the first date of the month following the date on which NIOC approved the commerciality study, either party may elect to withdraw from the negotiations unless the period is extended by agreement between the parties," OIL said.
Thereafter, NIOC may invite other companies and the Indian consortium to submit their proposal for the master development plan under competitive conditions, although priority would be given to the proposal submitted by the consortium.
"No timeline has been established for the implementation of the master development plan," OIL said.
Once the agreement on the master development plan is reached, NIOC will invite the consortium to negotiate the development services contract.
"NIOC and the (Indian) consortium have not reached any agreement on the terms of the development services contract," OIL said.