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Financial Times: Eon pursues gas deal with Iran

By Carola Hoyos in London, Daniel Dombey in Brussels and Ivar,Simensen in Frankfurt

Published: March 7 2007 02:00 | Last updated: March 7 2007 02:00

Eon, Germany’s biggest importer of natural gas, is pursuing its first gas supply contract with Iran in an effort to reduce its dependence on Russia.

The company yesterday confirmed it was in talks with liquefied natural gas producers over a supply contract. “One of the producer countries is, of course, Iran,” said an official.

Centrica, the UK’s biggest residential energy supplier, is also looking at Iran as a potential source of gas supplies following the decline in North Sea gas production.

Both Germany and the UK are at the centre of international efforts to persuade Iran to curb its nuclear programme and want to frame a United Nations resolution that would add to limited sanctions on Tehran, by tightening restrictions on the financing of its nuclear and missile programmes.

“No one is discussing full-blown trade and economic sanctions at this stage,” said a British official.”All we can do is to suggest to them that . . . they want to bear in mind that Iran is essentially in the international dock.”

That companies want to do long-term LNG deals with Iran despite the hostile political climate shows how difficult it is to secure long-term gas supplies, in particular for delivery dates from 2010-2011, by which time Eon hopes its Wilhelmshaven LNG facility will be ready.

Frank Harris, of Wood Mackenzie, the energy consultants, said: “Lots of people are desperate to buy volumes.”

Algeria and Nigeria were attracting interest as Russia’s supplies were called into question and projects, including those in gas-rich Qatar, were being delayed because of the capacity crunch in contractors.

Mr Harris said Iran was a risky place to do business. Three Indian buyers found their 2005 LNG deal for 5m tonnes a year disintegrated as the gas price rose.

Iran has attracted Anglo-Dutch Royal Dutch Shell and Spain’s Repsol as potential partners in its Persian LNG project and Total of France and Malaysia’s Petronas for its Pars LNG project.

A 20-year deal for 2m tonnes of LNG per year would be worth about $10bn, according to estimates.

Additional reporting by Hugh Williamson in Berlin

Copyright The Financial Times Limited 2007

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