State-run Indian Oil Corporation has entered into a $3 billion deal with Iran to develop a gas block in the enormous South Pars field, to build an LNG liquefaction plant and to sell the resulting product. This is the IOC’s largest non-Indian investment to date, and one of the largest single investments in South Pars.

Iran’s deal with IOC follows closely on the agreemenet with China for the development of the Yadevaran oilfield.

IOC will work with Iran’s Petropars in bringing to production one of the 30 phases planned to develop the 500-square mile South Pars field. Estimates peg the gas reserves at 436 trillion cubic feet. The LNG liquefaction plant will have a capacity of 9 million metric tons per year.

IOC will have a 40% stake in the upstream development with the remaining being Petropars’. IOC will have a 60% stake in the liquefaction plant, and the marketing rights to sell the entire 9 million metric tons of LNG.

Iran holds the world’s second largest reserves of natural gas—an estimated 940 trillion cubic feet—surpassed only by those in Russia. According to the US Energy Information Administration, around 62% of Iranian natural gas reserves are located in non-associated fields (i.e., not in conjunction with oilfields and oil production), and have not been developed, meaning that Iran has huge potential for gas development. South Pars is the largest non-associated field, and represents around 45% of Iran’s total gas reserves.

Development of South Pars is Iran’s largest energy project, having attracted around $15 billion in investment prior to this agreement with IOC. Some of the other energy companies involved include Total (France), Eni (Italy) and Statoil (Norway).