Indian oil firms plan to invest $3 billion to develop gasfields in Iran's Farsi block if Tehran gives the go-ahead, a source at one of the companies said.

The source added the block holds estimated recoverable gas reserves of 12.8 trillion cubic feet.

The Arabian Gulf block is the first overseas asset for which Indian firms have been given exclusive exploration rights, with a service contract awarded to them in 2002, but permission to develop the asset has yet to be given.

Iran is drawing interest from Indian and Chinese firms that are keen to tap the world's second-largest reserves of oil and gas and are less susceptible than many other companies to Western pressure over Tehran's nuclear programme.

India's state-run Oil and Natural Gas Corporation (ONGC) and Indian Oil Corporation each hold a 40 per cent participating interest in the Farsi block, while smaller outfit Oil India has the rest. It is operated by ONGC's overseas investment arm ONGC Videsh.

'So far we (the consortium) have invested $90 million and if we are allowed to develop the (gas) field, we would be investing around $3 billion,' the senior IOC officialsaid.

He added that the firm had submitted a gas commerciality report with Iranian authorities last December.

India has been intensifying its efforts to boost oil production abroad to make up for stagnating domestic output.

After an ONGC team recently met Iranian officials, the consortium is optimistic it will be awarded development rights for the block, the source said.

'ONGC officials recently had a meeting with Iranian authorities on approval of the gas commerciality report. They (ONGC) say Iran has indicated that we would be given development rights, too,' he added.

Indian firms will get a return of 35pc on the investment already made in the block, but rate of return for any further investment is 'yet to be negotiated', the official said.

He said the Indian firms would this month submit its commerciality report for the block's oil.