New Delhi: State-owned Oil and Natural Gas Corp. Ltd (ONGC) is in talks with Iran’s state-owned Petropars Ltd to buy a stake in South Pars, the country’s largest natural gas field, as it seeks to offset declining production at its ageing domestic wells.

Diversifying business: ONGC Videsh managing director R.S. Butola. Madhu Kapparath / Mint

“ONGC is looking to acquire some stake in phase 12 of South Pars since we already have an initial agreement with Petropars," R.S. Butola, managing director of ONGC Videsh Ltd, the overseas investment unit of ONGC, said in a phone interview.

India is competing with countries, including China and South Korea, for natural resources to meet demand in the world’s second fastest growing major economy. ONGC, which bought UK-based Imperial Energy Plc this year, is targeting 60 million tonnes of overseas oil and gas production by 2025, almost double India’s output in the year ended 31 March.

“The sheer reserves in Iran make sense for any oil company to invest there," said A.N. Sridhar, a fund manager at Sahara Asset Management Co. Pvt. Ltd in Mumbai. “ONGC needs to go wherever there is lots of gas."

The Indian explorer may also bid for oil blocks in Venezuela’s Orinoco Belt, Butola said in New Delhi on Tuesday. The South American country will provide final bidding terms for its biggest oilfield auction on 12 November and plans to open bids on 28 January to pump 400,000 barrels per day (bpd) from the Carabobo blocks.

ONGC also has the option to buy a share in a 825km pipeline that will transport gas from an offshore field in Myanmar to China because of its stake in the field, Butola said.

The state-run explorer’s shares rose 1.3% to Rs1,184.80 in Mumbai trading, compared with a 0.6% increase in the benchmark Sensex index of the Bombay Stock Exchange.

ONGC, which bought Imperial Energy for around $2.2 billion (Rs10,384 crore today) in March, has expanded production at its Siberian fields to 12,800 bpd from about 6,000 bpd at the time of the acquisition, Butola said. The company plans to increase output to 25,000 bpd by the end of 2010.

ONGC supplies almost 25% of India’s crude oil needs. Declining output at three-decade-old domestic fields has forced the explorer to diversify its sources of supplies to keep pace with the country’s increasing fuel needs.

Gas production at phase 12 in Iran may reach 3 billion cu. ft a day, with 1 billion to be consumed by Iran and 2 billion to be fed to a planned liquefied natural gas project, Petropars’ website shows.

South Pars is estimated to hold 501.4 trillion cu. ft of gas reserves, according to the website. The field extends from Qatar’s North Field, forming the largest known gas deposit in the world.

The field in Iran may start output in 2012 or 2013, according to Petropars.