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Shell, for Now, Pulls Out Of Iranian Gas Project

The Wall Street Journal: Shell, for Now, Pulls Out Of Iranian Gas Project

By BENOÎT FAUCON
May 12, 2008

Royal Dutch Shell PLC dropped out of a preliminary deal to join an Iranian natural-gas project, although it is looking at joining at a later stage, a company spokeswoman said.

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The news comes as western oil companies have been under pressure from Iran to finalize contracts and from the U.S. not to move forward with them.

In January 2007, Netherlands-based Shell, along with Spain’sRepsol YPF, signed a memorandum of understanding for the $10 billion Phase 13 contract. The Iranians had set a June deadline for finalizing the deal.

Shell’s decision is likely to fuel speculation that the company has bowed to U.S. pressure. The Shell spokeswoman would not directly comment on whether political factors influenced the choice, but she said, “like with all projects,” the decision on the liquefied-natural-gas project “is fundamentally driven by the need to ensure first-class decision quality.”

She said Shell was looking at the possibility of joining future phases.

“We believe Iran offers a number of potential business opportunities, and we are interested in developing these for the longer term,” she said. “Our main concern is getting the preparatory work right. No decision has been taken to proceed.”

A person familiar with the matter said Shell would now be looking at subsequent phases.

The news came as Europe and the U.S. continued to criticize Iran over its nuclear program and scrutinized any possible investment in its oil sector.

Last month, President Bush and United Kingdom Prime Minister Gordon Brown jointly slammed the Islamic Republic for its pursuit of a nuclear program.

In August, the Securities and Exchange Commission wrote to Shell Chief Executive Jeroen van der Veer, asking for financial details on the Pars preliminary agreement and demanding disclosures on the possible impact of the Iran deals on U.S. investor sentiment.

Iran, which holds the world’s second-largest gas reserves after Russia, plans to produce 76 million metric tons a year of liquefied natural gas by 2014, making it one of the largest gas exporters in the world.

Iran’s oil and gas projects have directly suffered from U.S. sanctions, which restrict access to U.S. equipment, spare parts and contractors. The finalization of the Pars LNG contracts with Shell and Total was also complicated by the price at which the preliminary deals were signed, much lower than today’s market prices.

Write to Benoît Faucon at [email protected]

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