OVL along with OIL and IOC to ink deal on developing Iran gas field :: Angel Broking

Visit http://indiaer.blogspot.com/ for complete details �� �


OVL along with OIL and IOC to ink deal on developing Iran gas field
ONGC’s overseas subsidiary, ONGC Videsh Ltd. (OVL) along with its partners, Indian Oil
and Oil India, is soon likely to sign a contract to develop Farzad-B gas field off the coast of
Iran at an estimated investment of over US $5bn.
The three firms had in August/September submitted a revised Master Development Plan
(MDP) for producing natural gas from the massive discovery. OVL, the lead partner in the
joint venture, had submitted an MDP for the gas discovery in the Farsi offshore block in
April last year. The discovery, which was subsequently named the Farzad-B gas field, has
in-place reserves of up to 21.68trn cubic feet (TCF), of which recoverable reserves may be
12.8TCF. OVL holds 40% interest in the Farsi offshore block, located in the eastern part of
the Persian Gulf, off the coast of Iran. OIL holds 20% interest in Farsi, while the remaining
40% is held by IOC.
The Indian consortium wants to liquefy the gas and ship it back home in the form of
liquefied natural gas (LNG). OVL, IOC and OIL have a service contract for the Farsi block,
under which they will be reimbursed for the entire US $90mn investment they made during
the exploration phase, as well as get an additional 35%. If the consortia get the
developmental rights, they will be paid a 15% return on developmental expenditure.
Given the fact that it is a developmental service contract, the profit potential from the same
is likely to be limited. Therefore, the upsides will be contingent on the execution skills of the
companies involved. We currently have a Neutral view on ONGC.