NEW DELHI: The international arm of the Oil and Natural Gas Corporation (ONGC) — the ONGC Videsh Limited (OVL) — has struck natural gas in the Farsi block of Iran with the reserves being estimated at 10 trillion cubic feet. The OVL, along with Indian Oil Corporation and Oil India Limited, are partners in this block that was awarded to it in 2002.

The Farsi oil block was awarded by the National Iranian Company to a consortium of OVL (40 per cent), IOC (40 per cent) and Oil (20 per cent). The geology and geophysical activities of the field were undertaken by the OVL team and drilling was carried out in 2006. The presence of hydrocarbon was established by the ONGC hired drilling rig "Kedarnath" in late 2006. The OVL won the bid for the Farsi block, in early 2002 and signed the Exploration Service Contract (ESC) with the National Iranian Oil Company for a four-year period on December 25, 2002. The OVL is the operator of this exploration block and owns a 40 per cent participating interest.

The minimum investment commitment in the exploration phase is $27million (OVL's contribution being $10.8 million) with a work programme which includes seismic survey and drilling of four wells. Against the minimum financial commitment of $27 million for the entire duration of the ESC, the consortium provisioned a budget of $ 79 million. The rig Kedarnath was deployed for the Farsi drilling operations. Of the committed four wells, the first well (BB-4) was drilled to the final depth of 2,395 metres. Well test yielded poor influx of heavy oil along with formation water. The second well BB-5 was also drilled up to 2,300 metres and oil flow was registered. Third well BB-6 was also completed and has proved to be oil bearing. The OVL had previously discovered oil in the Farsi block that lies 90-km off the Bushehr port. "We have now made a natural gas discovery in the fourth and final commitment well on the block," an ONGC official said.

Pre-fixed return

Though the official said reserves are under appraisal, estimates put the in-place gas reserves at 10 trillion cubic feet and oil reserves at 1 billion barrels. Interestingly, under the contract with the Iranian Government, the OVL cannot take oil and gas found in the block to India. The company has a service contract under which it is paid a pre-fixed return on the investment it makes. The OVL will now present a development plan to the Iranian authorities.

35 % rate of return

On the expenditure it made during exploration phase, Iran will pay a 35 per cent rate of return. For the development phase, the rate of return is to be determined.

Last year, the company had found oil traces in the first well it drilled in the extant corner of the block. The second well flowed 2,000 barrels a day of oil while the reserve was a little less in the third well. The fourth and final commitment well was drilled by the Kedarnath rig to a total depth of 3,400 metres and targeted the 1966 B Structure 1 (FB) gas discovery.

The previous three commitment wells appraised the 1972 BB 1 oil discovery and encountered heavy oil. The official said oil production could be in the range of 30,000-1,50,000 barrels a day.

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