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The Observer: Ministers tell Centrica not to buy Iranian gas

Oliver Morgan, industrial editor
Sunday March 4, 2007

The government has warned the energy group Centrica not to approach Iran in its attempt to secure future supplies of gas for its 16m UK customers.

Centrica, led by Sam Laidlaw, believes that the country, which has the world’s third largest reserves, will be one of three critical sources of gas as the UK becomes dependent on imports for up to 90 per cent of its supply by 2020.

However, Jake Ulrich, managing director of Centrica Energy, the exploration and production arm of the group, says it has been advised against seeking a long-term supply deal with the Iranian National Oil Company.

Ulrich told The Observer: ‘We have to deal with Iran. I don’t think we are in a position to deal with them at this stage. In our discussions with the Foreign Office, for instance, they say it would be good to have a commercial relationship but this is not the time.’

Centrica is not alone in experiencing the sensitivities surrounding commercial relationships with Iran. In January US State Department officials said a $10bn agreement allowing Shell and Spanish company Repsol to develop the giant South Pars gas field could lead to investigation by US authorities and possible future sanctions. Other UK companies are said to have received similar advice from the government.

Ulrich said Centrica was seeking to increase its own supplies of gas from the current level of 20 per cent of its customers’ requirements to 35 per cent. He sees deals with the world’s largest producers as an essential part of its strategy to expand its upstream assets.

He said: ‘Russia, Qatar and Iran are the top three. Ultimately, you have to deal with these three countries. Iran, like Qatar, would be a source of liquefied natural gas (LNG), transported to the UK via specialised tankers.

‘It is hard to envisage a long-term LNG strategy without Iran. They are the third largest reserves in the world. Some international oil companies are in Iran, Shell, for example. It is possible that we would do a supply agreement with one of them.’,,2025854,00.html

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