Iran Loses Patience with Shell’s Indecision

A04090039.jpgTEHRAN (FNA)- Shell has been warned by Iran that it must commit itself to developing a $10bn gas field in the Middle East country by June or risk the project being handed over to a rival.

Europe’s largest oil and gas company has delayed making a final decision on the grounds of soaring costs but also in the knowledge that a decisive move would put it in political conflict with Washington at a time of tension over Tehran’s uranium enrichment program.

Iran’s Oil Minister Gholam Hossein Nozari has been losing patience with Shell – and Total of France – over deals to develop phases 11 and 13 of the huge South Pars field, and this week issued an ultimatum.

“The deadline we have given to Total and Shell is June and it is the last chance we are giving them,” Nozari said, adding that Tehran “will definitely make the final decision” after the deadline.

Jeroen van der Veer, the chief executive of Shell, was expected to meet Nozari on the sidelines of an International Energy Forum meeting, which both were attending in Rome yesterday. “We will be discussing some projects with some companies,” Nozari said.

Shell was unavailable for comment last night but has said previously that it would not decide until the end of this year due to the difficult investment environment, where construction costs and the falling dollar were causing havoc with planning.

The group has refused to discuss the backlash any such move might produce in Washington. President George Bush is putting pressure on companies not to do business with Iran because of its nuclear program.

Shell had been hoping that a change in the US presidency would open the way for oil companies to pursue a deeper involvement in Iran.

Hossein Noghrehkar Shirazi, Iran’s deputy oil minister for international affairs, earlier said if the partners backtrack, “we will turn to other companies to develop the South Pars gas-field project, like what we did in Japan’s INPEX case”.

“We sent a good message to those who waste our time through INPEX and will replace them if they fail to come up with their commitments,” Noghrehkar Shirazi said on the sideline of the 13th International Oil, Gas and Petrochemicals Exhibition in Tehran.

Total and Royal Dutch Shell authorities said they rejected any timeframe set by Tehran, but the Iranian official said the projects would be relinquished to other high-qualified companies to undertake the project, the official said.

“Of course, it should be noted that Total and Shell are not willing to lose the opportunity,” he said, tacitly warning that the Iranian companies are able to accomplish the projects and will go ahead if the companies would not step in.

However; he refrained to mention the name of the would-be substitute if the two mentioned companies retract the project.

Officials in Iran said negotiations with a number of Asian companies had already started and that they were likely to replace Shell and Total if the two continued to prevaricate. There has already been speculation that Gazprom of Russia is keen to muscle in on the deal, while Sinopec of China has signed a $2bn contract to develop the Yadavaran oilfield.

“We have made a clear pact with Total and Royal Dutch Shell and now we should ask who had stonewalled the implementation of the accord and what the reason behind the long-term hiatus is,” the deputy minister posed.

Yet, Noghrehkar Shirazi said, “We still prefer these three companies to finish their jobs, but if they keep being slow their Swiss and Austrian friends may take over.”

Following US pressures on companies to stop business with Tehran, many western companies decided to do a balancing act. They tried to maintain their presence in the country but not getting into big deals that could endanger their interests in the US.

But after they witnessed that their absence in big deals has provided Chinese and India companies with excellent opportunities to signing up to an increasing number of energy projects and earn billions of dollars, many western firms are now losing reluctance to invest or expand work in Iran.

Oil giant Total also stressed last week that the French company cannot afford to lose deals with Iran as it is one of the largest oil producers in the world.

In an interview published on Thursday, Total’s Chief Executive, Christophe de Margerie, told Liberation, “Iran is one of the largest oil-producing countries in the world. And in terms of gas, we are far from having made all the discoveries possible. We cannot afford to be absent.”

De Margerie explained that despite the global political situations, oil and gas are not “stop and go” industries with investments covering 20 to 30 year periods. He cited Libya as an example: “It was difficult at times. If we had left, there would never be an income.”

“There is a general decline in oilfields. If we don’t move we’re heading for a real problem. And the decision makers, who have environmental problems in mind, seem to forget the question of access to energy,” he warned.

The Total Chief Executive Officer also said in February, “We have not burnt our bridges with Iran … We will find solutions to maintain our long-term presence.”

Norwegian energy group StatoilHydro said on Tuesday it has planned for a long-term presence in Iran as the country holds huge oil and gas reserves.

“Our main objective is to fulfill our commitments pertaining to phases six, seven and eight of the South Pars gas development projects, Anaran and Khorramabad perfectly and then take into consideration results (of the projects),” press tv quoted Jan Helge Skogen, Statoilhydro’s managing director in Iran, as saying.

“We seek long-term presence in Iran since Iran possesses massive oil and gas reserves, but at present, we are focusing on StatoilHydro’s three current projects and we are ready to mull over new investments,” he added.

According to the StatoilHydro, the company is an offshore operator for development of phases six to eight of the South Pars gas field. The company agreed to conduct a seismic survey during 2007 and to drill exploration wells over a four-year period in addition to gathering additional seismic data in Khoramabad.

American oil companies have also displayed eagerness to attend in Iranian projects.

As a first step several US oil companies participated in the 13th International Oil, Gas and Petrochemical Exhibition (IOGPE) in Tehran, which started in Tehran on Wednesday.

Analysts believe that participation of foreign companies from 30 countries is proving their opposition to the US sanctions. Iranian officials also share the same view.

“This indicated that they are disregarding pressures imposed by the world powers to isolate Iran from economic arenas,” Iranian Deputy Minister for Oil Sekhavat Asadi told Iran’s Petroenergy Information Network (PIN).

“It is important first of all from the [oil] industry point of view, because with more than 4 million bpd, Iran is an oil-producing country which cannot be dismissed by any company – sellers of equipment, sellers of services and so on,” Dr. Manouchehr Takin, a senior petroleum upstream analyst with the Centre for Global Energy Studies in London, told The Media Line.

“From the political point of view, I think the fact that politics has not hindered or stopped the exhibition is a significant point. This means that business takes priority over politics,” added Takin.

According to the US Department of the Treasury’s Office of Foreign Assets Control, it is forbidden for “US persons to trade in Iranian oil or petroleum products refined in Iran.”

Americans are also not allowed to finance such trading, and they “may not perform services, including financing services, or supply goods or technology, that would benefit the Iranian oil industry.”

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