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Forbes: Financiers Cold To Turkey’s Iran Gas Deal

Lionel Laurent, 10.04.07, 1:25 PM ET
 
LONDON – The stakes are high for investing in Iran, and Turkey has found out the hard way: it has failed to get financing from overseas for a $3.5 billion gas deal with the Islamic Republic, a development which points to further problems for the likes of Shell and Total.

The Turkish Energy Ministry was quoted as saying Wednesday that state-owned energy company TPAO is going it alone, once an agreement is finalized later this month, to develop several phases of the South Pars gas field in Iran for $3.5 billion.

With international pressure from the European Union and the United States mounting over Iran’s pursuit of nuclear power, international investors are less willing to put money down, regardless of the lucrative rewards. (See “Ahmadinejad Pays The Price For Posturing”)

“It is increasingly impossible to get financing,” said Global Insight analyst Samuel Ciszuk. He said that with costs going up all the time across the energy sector, it would be even harder to make sure the budget of $3.5 billion would be feasible.

Several international energy companies invest in Iran, including Total, Royal Dutch Shell and Eni, but the fear of harsher sanctions and spiraling costs have all but stalled some major deals.

Total is taking part in a liquefied natural gas project in South Pars, one of the world’s largest natural gas fields, but negotiations with the Iranian government have broken down, ostensibly over costs but also because of the risk of a political backlash. (See “Total Caught In France-Iran War Of Words”)

Shares in Total fell 17 euro cents (24 cents), or 0.3%, to 54.77 euros ($77.41), in Thursday afternoon trading in Paris. Royal Dutch Shell’s B shares fell 17 pence (35 cents), or 0.9%, to £19.37 ($39.51), in London, while A shares fell 11 pence (22 cents), or 0.6%, to £19.44 ($39.66).

Although the risk and cost factors are high, if Turkey succeeds with its investment, South Pars could be a major strategic asset. Europe is becoming increasingly dependent on Russia and Algeria for its gas, and if Iran is a viable alternative — once the nuclear impasse has been resolved — then Turkey will find itself in an ideal position as the EU’s gas gateway.

http://www.forbes.com/markets/2007/10/04/iran-total-turkey-markets-equity-cx_ll_1004markets16.html?partner=topix

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