TEHRAN, Dec 15: Iran is to start exploitation on Saturday of phases two and three of the giant offshore South Pars Gas field it shares with Qatar, the semi-official Iran newspaper said.

South Pars phases two and three are managed by a consortium led by France’s TotalFinaElf, which includes Malaysia’s Petronas and Russia’s Gazprom.

Production was expected to have started in October but this was pushed back because of labour, technical and administrative problems, the daily said.

The $2 billion project is expected to inject some 57 million cubic metres per day into Iran’s natural gas grid by the end of 2002.

Phase one, contracted by local company Petropars, is due to go on stream in about a year, according to the newspaper, which is published by the official IRNA news agency.

Iran has the world’s second largest natural gas reserves, after Russia, with some 26.3 trillion cubic metres of reserves. It has ambitious plans for South Pars, with reserves of more than 13 trillion cubic metres.

Upon completion, the South Pars field will produce 12 billion cubic feet per day of dry gas, 6.3 million tonnes per year of ethane, six million tonnes of Liquefied Petroleum Gas (LPG) and 20 million tonnes per year of condensates, Iranian officials say.

More than $7 billion worth of investment has been committed to the first eight phases of a planned 25-phase development of South Pars via buy-back contracts.

Under Iran’s buy-back scheme, designed to skirt a constitutional ban on foreign ventures in the upstream energy sector, a foreign company recoups its investment and gets a profit by receiving part of a project’s output.

Phases nine and 10, which will produce natural gas, LPG and gas condensate, are being contended by Norway’s Statoil, Korea’s LG and France’s Technip, among other firms.

Statoil is also in negotiations with the cash-strapped Petropars, which is developing phases 6-8 of the project, for a share in those phases, the daily quoted Petropars Director Akbar Torkan as saying.

Phases four and five are being developed by Italy’s ENI in association with Petropars.

Signed four years ago, Total’s South Pars deal was the first to challenge Washington’s Iran Libya Sanctions Act (ILSA) which threatens sanctions against any firm investing over $20 million in the oil and gas sectors of Iran and Libya.

TotalFinaElF is the only company spared from ILSA by an official waiver. —Reuters