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Reuters: UPDATE 1-Total says “huge cost issues” on Iran LNG project

Tue Jan 22, 2008 8:40am GMT 
(Adds nuclear plans, background)
By Simon Webb

ABU DHABI, Jan 22 (Reuters) – France’s Total (TOTF.PA: Quote, Profile, Research) said on Tuesday it was facing “huge cost issues” on a major liquefied natural gas project in Iran and was reviewing plans with the Iranian government.

“We are restudying the project. We are facing huge cost issues,” Philippe Boisseau, president of gas and power at Total, told reporters on the sidelines of a renewable energy conference in Abu Dhabi.

“We are reviewing the project with the Iranian government and it could take some time,” he said.

He declined to give an estimate on the latest cost of Pars LNG, which will be the Islamic Republic’s first LNG export terminal or say when Total might make an investment decision.

Pars LNG would be fed by developing part of the giant South Pars gas field in a project but construction costs have spiralled throughout the energy sector. The terminal was due to start in 2009 but has been pushed back to at least 2011.

Tehran has told Total and Shell to finalise their gas deals with Iran by June 2008 or the South Pars project will go ahead without them.

In September, France urged companies to exercise restraint in dealing with Iran as it, along with the United States and Britain, pile growing pressure on the Islamic Republic to halt its uranium enrichment programme.

France has toughened its opposition to Iran’s nuclear enrichment programme since Nicolas Sarkozy was elected president in May. The West fears Iran aims to produce atomic weapons but Tehran says it wants to generate electricity.

In a tour of Iran’s Gulf Arab neighbours earlier this month, Sarkozy offered French help in developing peaceful nuclear programmes and signed a nuclear cooperation accord with the United Arab Emirates (UAE).

Total, along with Suez (LYOE.PA: Quote, Profile, Research) and Areva (CEPFi.PA: Quote, Profile, Research) said they would join forces to develop plans for two third-generation nuclear reactors in the UAE with a possible start-up date of 2016.

Asked whether he was expecting to hear from the Abu Dhabi government about nuclear plans this year, Boisseau said he was “hopeful”.

“What we have done so far is to get ready with Areva and Suez to make a proposal if and when the time comes for the Abu Dhabi government to start the discussion,” he said.

“That is where we are. We are just getting ready,” he said, declining to give any more details.

Off-the-shelf technology like Areva’s reactors would require the UAE to import uranium rather than enrich its own, averting the fears over arms development that Iran’s project has raised.

(Writing by Lin Noueihed; editing by James Jukwey)

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