Iran to grant gas contracts to European firms

February 26, 2006

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TEHRAN, Feb 25: Iran will next week grant Total, Shell and Repsol upstream development contracts in the giant South Pars gas field in the Gulf, an Iranian state oil firm said on Saturday.

Iran intends to use phases 11 and 13 of South Pars, which sits on the world’s biggest reservoir of natural gas, to produce liquefied natural gas (LNG). The Islamic Republic hopes to export its first LNG shipments in 2009.

“The signings will be late this week,” said a spokesman for the Pars Oil and Gas Company.

The Iranian working week starts on Saturday and ends on Wednesday or Thursday, depending on the institution.

Total is looking to develop phase 11 of South Pars to produce LNG, gas super cooled to liquid for loading onto tankers, in a project called Pars LNG.

Shell and Repsol are looking to do the same with phase 13, a project called Persian LNG.

Akbar Torkan, managing director of the Pars Oil and Gas Company, was quoted by the Abrar-e Eqtesadi financial daily saying the contract to develop phase 11 would be worth $1.2-$1.4 billion.

The phase 13 deal would be worth $1.5 billion, he added.

Although it sits on the world’s second biggest reserves of natural gas, Iran has been very slow to develop exports.

Qatar, which draws its gas from the same Gulf reservoir, is a long-established LNG exporter.

Iran has been reported to the UN Security Council for possible sanctions after failing to convince the world its atomic ambitions are entirely peaceful.

However, Iran has struck a defiant tone on its oil and gas industry, saying industrialised countries would never dare embargo hydrocarbons from OPEC’s number two exporter while oil prices remain high.

Torkan also told the ISNA students news agency that Pars Oil and Gas Company had tendered phases 19-21 of South Pars.

UAE gas deal: Iran’s state audit organisation has drawn up a report on a gas export deal to the United Arab Emirates so parliament can debate whether the terms are still acceptable, an Iranian parliamentarian said on Saturday.

The original deal was for Iran to supply gas from the Salman field in the Gulf to the UAE’s Crescent Petroleum. Crescent is a shareholder in Dana Gas, which sells the gas to utilities and other industrial users.

The contract has come under fire from several Iranian officials who say Iran will lose out because gas prices have risen sharply since the contract was agreed.

Mohammadreza Rahimi, head of the audit organisation, was quoted by Iranian media last week as saying the deal had pencilled in a price of $17.50 for every 1,000 cubic metres of gas whereas the current market rate should be nearer $65.

Mohsen Yahyavi of parliament’s energy commission told Reuters Iran’s lawmakers would discuss the contract after they had finalised the national budget bill. He could not say when that would be.

Although Iran sits on the world’s second biggest reserves of natural gas after Russia, it has been slow to develop these reserves for export.

Crescent Petroleum said late last year that National Iranian Oil Company had laid a pipeline to Crescent’s offshore facilities, which would let Dana Gas to import cheap gas from Iran.

—Reuters