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Gulf-Times (Qatar): Iran sees major LNG deal with foreigners

Published: Wednesday, 30 May, 2007, 08:26 AM Doha Time
 
TEHRAN/DUBAI: 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 yesterday on Shana, the oil ministry press agency, without providing the name of the foreign company.

The announcement comes amid reports that  the US is piling pressure on European banks and energy firms to avoid doing business with Iran, sending a blunt message that reputations are at stake if they do so.

Washington, leading efforts to isolate Iran over its atomic programme, has slapped sanctions on two Iranian banks. UN sanctions have targeted one.

Iran is fighting back with plans to set up an overseas investment fund in Bahrain or Dubai to help finance South Pars. Washington is working hard behind the scenes to ensure that Iran cannot raise the cash it needs.

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 yesterday.

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 programme.

Total and Royal Dutch Shell 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.

Iran still hasn’t produced its first tonne of LNG. The country has signed only one sales agreement, with India, for the shipment of 5mn metric tonnes of LNG a year starting in 2009.

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

Iran LNG is expected to yield 10mn tonne of LNG and 700,000 tonnes of liquefied petroleum gas, or LPG, a year, Shana said.

In February, as part of the Phase 12 development, Iran awarded a $500mn 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.

France’s Total missed a March 31 deadline set by Iran to make a final decision on developing phase 11 of South Pars. Two weeks later, Iranian Deputy Oil Minister Gholamhossein Nozari extended the deadline by “three to four months.”

In addition to geopolitical considerations, Iran and Total have disagreed on the price of gas from the field. Total chief executive Officer Christophe de Margerie said on April 5 the cost of developing the LNG project had more than doubled.

Total owns 30% of the LNG venture called Pars LNG, which intends to build a $2bn facility using gas from the 11th phase of development.

Similarly, Shell has postponed an decision on a $2.5bn LNG project known as Persian LNG in South Pars. The Iranian oil ministry had called for it to decide by the end last month. “The final investment decision is about a year from now,” Shell chief executive officer Jeroen van der Veer said in Davos on January 25.

Foreign energy companies are already facing reduced profit in Iran. Red tape, technical glitches, tougher contract terms and US trade sanctions all are hampering development.

US companies are barred by law from investing in Iran’s energy industry.
Iran ejected foreign oil and gas companies after the 1979 Islamic Revolution. It invited them back in the 1990s to rebuild fields damaged by eight years of war with Iraq and to explore for new sources of energy.

Despite US and UN sanctions, Iran says foreigners are keen to invest in its oil and gas reserves, the world’s second biggest. At least $100bn of foreign cash will be needed over the next decade to boost output by 1mn bpd to 5mn.  –

Bloomberg, Reuters

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1 Comment on “Gulf-Times (Qatar): Iran sees major LNG deal with foreigners”

  1. #1 Terror-Free Oil
    on Jun 25th, 2007 at 17:00

    Please sign petition to Shell to stop doing business with terrorist regime of Iran!
    http://www.terrorfreeoil.org/projects/petition_shell.php

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