Indian Oil Exec Says Iran Farsi Block Gas Devt. May Cost $3B

NEW DELHI (Dow Jones Newswires), June 13, 2008

Indian Oil Corp., along with other state-run Indian oil firms, is eyeing a $3-billion project to develop the gas find in Iran's Farsi block, a senior company executive said Friday.

The companies have submitted the commerciality report for its gas find in the Farsi block to the Iranian government last December.

Indian Oil and its partners in the project - Oil India Ltd. and ONGC Videsh Ltd., the overseas arm of state-run Oil & Natural Gas Corp. (500312.BY)) - have a service contract for the Farsi block.

Indian Oil and ONGC Videsh own 40% interest each in the block and Oil India holds 20%. The development of this block, which has estimated reserves of 12.8 trillion cubic feet of gas, may cost $3 billion, said the executive.

"So far, we have invested $90 million (for exploration) and if we are allowed to develop the field, we would be investing around $3 billion," he said.

The consortium is now waiting to get approval from Iran to develop the field and produce gas, and the project could take three to four years.

Under their current service contract, the companies will earn at least 35% returns on their exploration investments made so far in the block even if they don't get to develop the field, he said.

The block also holds in-place reserves of more than 1 billion barrels of "very heavy" crude oil of 14 degrees API, he said.

The consortium will likely submit the commerciality report for the crude oil find within this month, the executive said.

Indian Oil will start drilling in one of its three exploration blocks in Libya early next year, he said. The company had two exploration blocks in Libya and was recently awarded a third block.

LNG Supplies

Indian Oil, which has been hunting overseas to secure term liquefied natural gas supplies to fuel its proposed terminal in India, has started informal negotiations with at least four countries, the executive said.

"We have started informal dialogue with Papua New Guinea, Australia, Algeria and Egypt for LNG," he said. Indian Oil and Petronet LNG Ltd. (532522.BY) are jointly seeking LNG from projects in these countries, he said.

"Most LNG projects that are coming up by 2012 have already tied up customers...we are looking at projects that come on stream after that, from 2014," he said.

The company has put its planned LNG terminal project in India on hold until it can secure term supplies, he said. "The LNG has to be tied first before we can start construction."

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