India’s Economic Times recently reported that a consortium of public sector oil companies — ONGC Videsh (OVL), Indian Oil Corporation (IOC) and Oil India (OIL) —  has proposed to invest $3 billion to develop Farsi block in Iran where they have found 12.8 trillion cubic feet (tcf) of gas.  As the article notes:

“…The block also has over 1 billion barrel of in-place oil reserves. The consortium is yet to submit a commerciality proposal for the development of the oil asset. The commerciality report for gas development though had been submitted to Iranian authorities in December 2007.

The consortium partners have invested around $90 million in exploration of the asset, which includes drilling of four wells. It found gas in two wells and oil in one. Oil discovery in the block is stated to be “very heavy”, according an official.

As the consortium has an exploration contract, its return on investment is ensured. “We will get 35% return on the exploration investment made in the block and hope to get 15% return on development. The returns could be less as the risk is low,” the official said.

The group is hopeful that it would get service contract for developing the asset. “The development cost is estimated at $3 billion. Indian Oil’s share in the investment would be $1.2 billion. Commerciality report on oil is yet to be finalised and is likely to be submitted later this month,” another official disclosed.

The official said the gas development could be completed in 3-4 years after the consortium gets the approval. ONGC, which is trying to tie up liquefied natural gas (LNG) contracts for its proposed Mangalore LNG terminal, is hopeful of sourcing gas from the block.“