OVL, the overseas arm of state-run Oil and Natural Gas Corp, had previously discovered oil in Iran's Farsi offshore block that lies 90-km off Bushehr port.

"We have now made a natural gas discovery in the fourth and final commitment well on the block," a top company official said here.

OVL has 40 per cent stake in the 3,500 sq km block. Indian Oil Corp (IOC) has a similar stake while Oil India Ltd (OIL) has the remaining 20 per cent stake in the block.

Though the official said reserves are under appraisal, some estimates put the in-place gas reserves at 10 trillion cubic feet and oil reserves at one billion barrels.

However, under the contract with the Iranian government, OVL cannot take oil and gas found in the block to India. "We have a service contract under which we are paid a pre-fixed return on the investment we make," the official said.

OVL will now present a development plan to the Iranian authorities for bringing to production the oil and gas finds in the block. Iran will pay a 35 per cent rate of return to the consortium on the expenditure it made during exploration. For development phase, the rate of return is to be determined.

Last year, the company had found oil traces in the first well it drilled in the extant corner of the block. The second well flowed 2,000 barrels per day of oil, while the reserve was a little less in the third well.

The fourth well was drilled by ONGC's own Kedarnath rig to a total depth of 3,400 metres, the official added.