India's Minister for Petroleum and Natural Gas Dharmendra Pradhan said Iran, currently OPEC's third largest producer, has assured the South Asian country that the latter would be granted the license to develop the offshore Farzad B gas field in the Persian Gulf although the award has been stalled by the issue of gas price, according to a report Friday by local media The Economic Times.

Iran had indicated earlier that it wanted to own marketing rights for gas intended for the local market and so wanted to keep domestic gas price at low rates. The Middle Eastern country have now changed its position. It now wants Farzad B developers to market gas produced from the offshore field and is seeking higher prices for the fuel.

"Iran has in-principle agreed to give the field to India on nomination basis. Right now price is being discussed," Minister Dharmendra Pradhan told reporters in New Delhi, as reported by The Economic Times.

Pradhan added that the price has to be right to give Indian firms developing the gas field a healthy rate of return on their investments, but it has also to be acceptable to Iran -- the owner of the natural resources.

"We have an October deadline to finalize a contract and are hopeful to do so within the deadline," the Minister said.

An Indian consortium had discovered 12.8 trillion cubic feet (Tcf) of gas reserves in the Farsi block in 2008. ONGC Videsh Ltd., the foreign upstream arm of state-owned Oil and Natural Gas Corp. Ltd., was a key partner in the joint venture, which also include Oil India Ltd. and Indian Oil Corp. Iranian Petroleum Minister Bijan Zangeneh said in April that the Farzad B field can produce 3 billion cubic feet per day (Bcf/d) of natural gas, but Iran signed a memorandum of understanding to produce only 1 Bcf/d of gas from the field.

Meantime, the joint venture has submitted a development plan last year for the Farzad B field with options to export the gas either in form of liquefied natural gas (LNG) or through a subsea pipeline.

"We can bring gas from Iran to India via both options. It demands on techno-economic viability," Pradhan said, as quoted in The Economic Times.

Indian oil and gas firms are returning to invest in the Iranian petroleum sector following the lifting of international sanctions imposed on Teheran's nuclear program earlier this year.

The Economic Times noted that Farzad B operator ONGC Videsh had submitted a revised development plan to produce 60 percent of the 21.68 Tcf of in-place gas reserves at the field in August/September 2010. The company did not sign the development contract then amid fears of sanctions imposed by the U.S. on firms that invest more than $20 million in Iran's energy sector in any 12-month period.

ONGC Videsh and Indian Oil Corp. each hold 40 percent interest in the Farsi block, while Oil India owns the remaining 20 percent.

By Rigzone