Iran has awarded the development of an offshore oil field that state-owned Oil and Natural Gas Corporation had abandoned as commercially unviable, to a domestic company.
ONGC Videsh Ltd and its partners Indian Oil Corporation and Oil India Ltd had in 2009 dropped plans to develop the Binaloud oil find in the Farsi offshore block as it found one billion barrels of reserves commercially unviable.
However, Iranian Offshore Oil Company has found production of heavy crude oil from the field would be possible in the near future, Iran's semi-official Mehr news agency reported.
Binaloud holds about 3.5 billion barrels of oil in place, more than three times ONGC's estimate of 1 billion barrels of heavy crude with 14-degree API gravity, Jalal Mousavi, head of the company's research and development bureau, was quoted as saying.
"Even though preliminary studies by ONGC evaluated the field as uneconomical, [our] studies and examinations show that with different approaches we can produce from the field," Mousavi said.
OVL-IOC-OIL joint venture had in 2006 made an oil discovery in the Farsi offshore block, which was later named Binaloud. The discovery was found to be commercially unviable primarily due to high sulphur content in the oil. When the discovery was made, OVL was granted priority to develop it as per Tehran's model for oil exploration and development.
The company's subsequent decision to abandon Binaloud, however, removed its eligibility to perform further exploration in the offshore license area, opening the way for Tehran to step in.
However, Indians remain in contention for the Farzad-B gas find in the same Farsi block. But they haven't yet signed a contract for the development due to US and western sanctions against the Persian Gulf nation.
In February 2012, Iran issued an ultimatum to OVL to decide whether it would develop Farzad B, after the company missed the November 2010 deadline that had been set for the investment decision.
Farzad-B gas field is estimated to hold inplace reserves of up to 21.68 trillion cubic feet (Tcf), of which 12.8 Tcf of gas and 212 million barrels of condensate may be recoverable.
The first development phase of the project is expected to yield 1.1 billion cubic feet per day of gas output.
Sources said OVL is yet to sign the development contract as it is wary of participating in Iranian oil and gas sector for fear of being sanctioned by US and EU.
OVL and IOC have 40 per cent stake each in the Farsi block that was awarded to the Indians in 2002. OIL has the remaining 20 per cent.