Monday, September 18 2006 15:26 Hrs (IST) - World Time -

Tehran: Iran and Norwegian firm Norsk Hydro have signed a deal for exploration of the major onshore oil block of Khoramabad in western Iran, state television and the company said on today (Sept 18, 2006).

The initial investment for the exploration amounts to 49.5 million dollars and can be increased up to 107.5 million dollars in case of additional costs," the sources said.

The contract was signed in Tehran between the National Iranian Oil Companys exploration department and Hydro Zagros, the Iranian unit of Norwegian oil and gas firm Norsk Hydro. The contract is based on a joint package of exploration-development, under which the block will be awarded to the contractors if they find profitable hydrocarbon reserves.

However, if the exploration does not end up recovering profitable oil, none of the costs would be paid back to the Norwegian side by Iran.

Norsk Hydro said in a statement that work is now at the planning stage and collection of the seismic data will start this year.

"If exploration proves to be successful, the period of the agreement will be 25 years," it said.

The contract includes drilling three exploration wells, 2D seismic studies, re-testing previous seismic studies, geological studies and training staff.

Khoramabad is located in western Iran, adjacent to the city of Khoramabad in Lorestan province and covers an area of 7,425 square kilometers (2,867 square miles).

The oil block is one of the 16 put out to tender in early 2004 for a joint exploration-development plan, and the fourth to be finalised.

A contract for exploration and development of Garmsar oil block was awarded to Chinese Sinopec in June. Exploration of Saveh and Kouhdasht oil blocks had started by the Thai PTTP and Chinese China National Petroleum Corporation, respectively, in June 2005.

The 16 onshore blocks are Bijar, Garmsar, Kermanshah, Khoramabad, Kouhdasht, Moraveh Tappeh, Raz, Saravan, Saveh, Tabas, West-East Makran, West Jazmourian, Zabol and two blocks in the area of Moghan.

The approximate period for each block is 25 years, including four or five years of exploration, two years for description of the blocks, six to seven years of development and seven to ten years for the repayment of the investment.