Iran raises pressure on Shell/Total over South Pars

Energy Trade

Iran stepped up pressure on France’s Total and Royal Dutch Shell on Monday to decide soon whether to develop two major gas and oil assets in the Gulf or the project would go ahead without them.

The head of the National Iranian Oil Company (NIOC), Seifollah Jashnsaz, suggested in comments carried by Iranian news agencies the two energy groups only have until Friday to decide on whether to invest in the giant South Pars field. This was contradicted by managing director Ali Vakili of the Pars Oil and Gas Company (POGC) who said the deadline expires during the Iranian month that ends in June, in comments that were in line with earlier Iranian statements. But Vakili said talks with alternative investors had already started and Asian companies were the most likely contenders to step in if Shell and Total did not act within the time limit set by Tehran, without naming them.

Iran, facing mounting pressure from the West to abandon its nuclear ambitions, is seeking to attract foreign investors to help it develop its huge gas and oil reserves. But talks are often protracted and can take a long time to finalize. Iran urged Total and Shell in October to finalize their deals on the South Pars gas project by mid-2008 or lose the contracts, after the two oil firms delayed investment due to soaring cost.

Iranian Oil Minister Gholamhossein Nozari last month said Tehran would not extend the June deadline. The ISNA news agency on quoted Jashnsaz as saying on Monday: “The last deadline ... would be the end of Farvardin (the Iranian month that ends on April 18).” But both ISNA and the Fars News Agency also cited Vakili as saying it was in the month of Khordad, which ends on June 19. “The deadline of Shell and Total in South Pars phases 11 and 13 will not be extended and probably Asian companies will replace them,” Vakili said, according to Fars. “Negotiations with a number of Asian and European companies have begun, and in the event that Shell and Total do not act within the specified time period, Asian companies will replace them,” he said.

Iran has struck several oil and gas deals with firms from energy-hungry Asia in recent months. An official at the public relations office of POGC said he could not explain the different dates given by the head of his company and Jashnsaz. But he added: "What, in effect, they mean is to give an ultimatum on the end of cooperation between POGC and the two companies."

Total agreed in 2004 to develop the $2 billion liquefied natural gas Pars project, Iran’s first LNG terminal, but costs have spiraled in the energy sector and the terminal that was due to start in 2009 has been pushed back to at least 2011. (Reuters)

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