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Bloomberg: Iran Likely to Sign Major LNG Deal With Foreign Partner in June

By Marc Wolfensberger

May 29 (Bloomberg) — Iran expects to sign a multibillion- dollar agreement with a foreign partner next month to produce liquefied natural gas, or LNG, from the South Pars field, the world’s biggest gas reservoir.

“We’ve signed the draft contract with a foreign contractor and the main contract will be signed within the next month,” Ali Kheir-Andish, the project director, said today on Shana, the oil ministry press agency, without providing the name of the foreign company. The LNG project, called IRAN LNG, will use gas from phase 12 of South Pars, he said.

In April, OMV AG, central Europe’s biggest oil company, signed a preliminary agreement to develop that phase and build an onshore gas liquefaction plant. Vienna-based OMV said then a final agreement might not be made until the second half of this year. “This deadline is too early for us,” OMV spokesman Thomas Huemer said in a telephone interview from Vienna today.

Iran, the site of the world’s second-largest oil and gas reserves, is pushing foreign companies to sign energy agreements quickly, as its international isolation grows over its nuclear program. Total SA and Royal Dutch Shell Plc are studying similar LNG projects in Iran and both companies have delayed decisions, citing the country’s geopolitical situation.

“We’ve said `second half of this year,’ and we’re sticking to this deadline,” OMV’s Huemer said. It “could be” that Iran is talking to other foreign companies to develop that phase 12, the spokesman said.

Qatar’s Advantage

Qatar, which shares ownership of South Pars, has taken advantage of Iran’s economic isolation to widen the gap with its neighbor in developing the field. The Arab country became the world’s largest LNG exporter in 2006, ahead of Indonesia. Iran still hasn’t produced its first ton of LNG.

The field, discovered in 1966 by Shell, contains an estimated 600 trillion cubic feet of gas, or almost a 10th of the world’s reserves.

Iran LNG is expected to yield 10 million tons of LNG and 700,000 tons of liquefied petroleum gas (LPG) a year, Shana said. LNG is gas cooled to liquid form for transport by ship to places not connected by pipelines. LPG is generally used by households for cooking and heating.

In February, as part of the Phase 12 development, Iran awarded a $500 million LNG and LPG storage-tank contract to a group that includes South Korea’s Daelim Industrial Co. and the economic arm of Iran’s Islamic Revolutionary Guards Corps.

To contact the reporter on this story: Marc Wolfensberger in Tehran at [email protected]

Last Updated: May 29, 2007 04:04 EDT

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