Reuters: Foreign cash still flows to Iran's oilfields

Foreign cash still flows to Iran's oilfields

 

Sun Apr 23, 2006 5:23 PM GMT  

 

 

By Ghaida Ghantous and Barbara Lewis

 

DOHA (Reuters) – Iran's dispute with the West over its nuclear work is not scaring foreign investors from the country's prized oil, which Tehran vows to keep exporting no matter what.

 

Iran stands accused of seeking to develop nuclear weapons and may face United Nations sanctions if it does not stop enriching uranium. Iran says it only wants to produce electricity.

 

“The idea of having other sources of energy was recommended to Iran 15 years before the (Islamic) revolution,” Oil Minister Kazem Vaziri said on Sunday.

 

“The Americans at that time were supporting this idea that we have to have another source of energy because of our population and for Iran to stay a stable producer and supplier of oil.”

 

But oil remains the top attraction for foreign money.

 

“Recently, in tenders we have had some very good activity and participation of foreign companies…from all over the world,” Vaziri said on the sidelines of an energy forum in Doha.

 

Foreign oil executives are hopeful Vaziri can end years of commercial paralysis brought on by vicious infighting and layers of bureaucracy in Iran's oil sector, stagnant since the 1979 Revolution.

 

Iran's oil and gas fields have been open to outsiders since 1995 — with European firms Royal Dutch Shell, Total and Eni investing billions to help lift output capacity by 500,000 barrels per day (bpd).

 

And despite criticism of its foreign investment drive, Iran is now the only Middle East producer with abundant untapped oil reserves that has opened up to foreign cash.

 

SHELL

 

Shell's Chief Executive Jeroen van der Veer, also at the Doha forum, said Iran remains a prime investment target. “I think one has to realise that Iran has huge oil and gas reserves,” he said. “This is all about energy for the future of the world that can be developed, contracts which last for decades and that's a completely different time horizon.”

 

Despite the slow pace of Iranian decision-making and the absence of U.S. technology and firms due to Washington's unilateral sanctions, Iran has managed to boost production capacity to 4.2 million bpd.

 

Multinationals are hoping for access to Iran's sought-after Yadavaran and Azadegan oilfields, but executives want state-run National Iranian oil Co to sweeten commercial terms.

 

The so-called buy-back investment model, where foreign firms are repaid with proceeds from oil output, has drawn criticism. Western oil executives say risks far outweigh rewards, while some Iranian politicians remain distrustful of foreign capital.

 

Tehran has said it was reviewing its buy back contracts to make investment in its fields more alluring.

 

“We have received all the views and we're doing it and I think we're very close to a conclusion,” Vaziri said without elaborating.

 

China's Sinopec hopes to develop the huge southwestern crude field of Yadavaran. Negotiations have been bogged down, Tehran insists for commercial reasons rather than the dispute over its atomic ambitions.

 

Japan's INPEX signed a deal for Azadegan in February 2004, but work has been held up rising project costs, particularly for steel.

 

Iranand INPEX have also had to haggle hard over whether the field has been safely cleared of mines, left from the 1980-88 war with Iraq.

 

© Reuters 2006. All Rights Reserved.

 

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