Iran: Shell, Total must Finalize Gas Deals by June

France’s Total and Royal Dutch Shell must finalize their gas deals with Iran by June or the giant South Pars project will go ahead without them, an Iranian official was quoted as saying. Iran, with the world’s second largest gas reserves after Russia, had previously warned the French energy major not to bow to political pressure to steer clear of the Islamic Republic.

French President Nicolas Sarkozy called last month for tougher international sanctions against Iran’s nuclear programs and warned Total and gas firm Gaz de France to stop investing in OPEC’s second-biggest oil producer.

“Total and Shell have only until June 2008 to finalize their deals,” oil ministry web site Shana quoted the managing director of Pars Oil and Gas company, Ali Vakili, saying on Tuesday. Shana carried his comments on Wednesday.

“In the past few days and in order to finalize the deals … we gave an ultimatum to Total and Shell and if we don’t reach an agreement with them, we will not extend the time for talks,” Vakili said.

Both Shell and Total have said rising industry costs had delayed their multi-billion dollar investments in Iran’s first liquefied natural gas (LNG) project, which would be fed by the giant South pars gas field.

The Anglo-Dutch company has a preliminary deal to develop part of the South Pars gas field, despite Washington urging its allies not to invest in Iran because of Iran’s progress in the nuclear technology.

Total agreed to take on the project to build Iran’s first LNG export terminal in February 2004, with an initial start date of 2009 that has since been pushed back to 2011 after years of debates over terms.

Iran initially said the project was worth $2 billion, but European companies allege that construction costs have since spiraled throughout the energy sector.

Iran’s caretaker Oil Minister Gholam Hossein Nozari said in September a price in excess of $11 billion quoted by Total was too high for Iran and that his country could easily find replacements.

“We are having intensive negotiation with them (Total and Shell) in this regard,” Vakili said.