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Financial Times: Tehran hints at rethink of Total LNG contract: ‘confident… of signing contracts with Shell and Repsol’

By Najmeh Bozorgmehr in Tehran
Published: September 17 2007 03:00 | Last updated: September 17 2007 03:00

Iran’s acting oil minister said on Sunday that the multi-billion-dollar liquefied natural gas agreement with Total of France to develop part of South Pars, the world’s biggest field, needed ‘reconsideration’ because of differences over the price Tehran would be paid for its gas.

Gholam-Hossein Nozari said the rate quoted by the French energy group on marketing LNG was high, which would force Iran to “study the feasibility of this plan once again”.

Iran lacks expertise in marketing LNG, making it dependent on the large oil companies to do so as part of development contracts.

“Total was supposed to buy 5.5m tons of LNG -products. We think this amount should be supplied to the market and not to Total,” Mr Nozari told a press conference. Iran this year asked Total to reconsider its price and extended its deadline to July.

Christophe de Margerie, the chief executive of Total, this month told the Financial Times that the plan, valued at about $15bn (£7.5bn), had stalled. “The estimated cost has doubled between the time we were negotiating the contract and now. So if we cannot solve this issue, we will be stuck.”

However, one oil expert said Iran was positive that the French company would come up with a new rate.

Mr Nozari was confident about the prospect of signing contracts with Shell and Repsol, the Spanish group, towards the end of 2008 for the joint development of 50 per cent of two of the 28 phases of the South Pars project.

Analysts believe the oil groups are willing togamble on Iran’s energysector, hoping to get agood share in future projects if international pressure over its nuclear programme eases, but are reluctantto sign contracts. This uncertainty has affected investment in oil and gas sectors.

Iranian media reported yesterday that 8,000 staff – or two-thirds of the 12,000 workers in South Pars – had lost their jobs. However, Iran is still enjoying high oil revenues, amounting to $24bn during the first five months of this Iranian year which started March 21, according to Mr Nozari.

Separately, Mr Nozari said that Tehran wouldconsider a bilateral contract with Islamabad in talksnext week over a pipeline project to export gas toPakistan and India if New Delhi refused to joindue to differences over transit fees.

Copyright The Financial Times Limited 2007

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