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The Age (Australia) : Shell Iran deal revives BHP pipedream

EXTRACTS: THE lure of Iran’s vast oil and gas reserves has proved too tempting for Repsol and Royal Dutch Shell… But Washington’s tough line over petroleum investment in Iran means it will be hard for companies to maintain operations in the US.  John Browne, chief executive of rival BP has bowed to US pressure and will not invest in Iran — he is concerned about compromising his company’s US interests.

Mark Hawthorne
Wednesday January 31, 2007

THE lure of Iran’s vast oil and gas reserves has proved too tempting for Repsol and Royal Dutch Shell, which are negotiating to build a $US4.3 billion ($A5.6 billion) liquefied natural gas (LNG) plant and port terminal at the country’s South Pars gas field by the end of the year.

Watching negotiations with interest is BHP Billiton, which for more than a decade has cast a wistful eye over South Pars.

In 2003, BHP completed a feasibility study into building a 2500-kilometre pipeline from South Pars through Pakistan and into India — dubbed the peace pipeline, with more than a touch of irony.

The pipeline has been hindered by the dispute between Pakistan and India over Kashmir. According to reports from New Delhi, BHP plans to bury the pipeline. Gas pumps installed every 100 kilometres will be cased in concrete that can “withstand rocket attacks”.

“In 2003 we did a pre-feasibility study into the technical, commercial and economic merits of building the pipeline,” said BHP spokeswoman Samantha Evans. “We found it was commercially viable to build, but much now depends on the governments of Iran, Pakistan and India coming to a political agreement.”

In 2003, when the study was completed, oil prices averaged $US31 a barrel. Higher prices and India’s growing demand for LNG have made the numbers more attractive. The huge South Pars field is expected to produce billions of cubic metres of gas, and the Shell-Repsol plant could set the ball rolling for the pipeline’s construction.

But Washington’s tough line over petroleum investment in Iran means it will be hard for companies to maintain operations in the US.

John Browne, chief executive of rival BP has bowed to US pressure and will not invest in Iran — he is concerned about compromising his company’s US interests.

BHP’s Middle East interests were acquired in the mid-1990s, under the reign of petroleum division chief John O’Connor.

A former Mobil executive, O’Connor took BHP into Iraq, Iran, Syria and Pakistan. BHP opened an office in Tehran in 1998 to help facilitate the pipeline’s construction (it has since been closed).

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