OilVoice - Tehran Gives European Majors Investment Deadline

Tehran Gives European Majors Investment Deadline

Thursday, April 29, 2010

The Iranian government has given two European oil majors a deadline to declare their interest in investing in the South Pars natural gas project. Tehran has given Spanish giant Repsol YPF and Anglo-Dutch behemoth Royal Dutch Shell until the end of the week to make up their minds.

Ali Vakili, head of the state-run Pars Oil and Gas Company (POGC), has made it clear that the development of the gas project would not wait for the investment of either of the overseas majors, and that plans would go ahead with or without either of them.

Simultaneously, the nation's oil ministry has offered a new debt issuance scheme, to create proceeds that would likely be used to develop energy projects - including the likes of South Pars. It seems Iran is taking the initiative to develop its own natural supplies as an increasing number of overseas firms back away under the might of Western political pressure. However, Iran's lucrative oil and gas industry may well attract a new range of investors who find the door left open by those withdrawing.

The South Pars natural gas project is the Middle Eastern nation's largest gas field. The field has potential reserves of around 12 trillion cubic meters of natural gas - according to the US's Energy Information Administration (EIA). To put this figure into context, it is equivalent to around 60% of Iran's total gas reserves.

Development work at the field has long been in the talking, however.

At first the field attracted a large number of overseas investors, but their interest has slowly waned owing to strengthening political pressure from the West and the United Nations (UN).

Back in 2008, Repsol and Shell were at the centre of a highly-public exit from their investment in South Pars Phase 13. Upon completion, phase 13 was would have supplied the feedstock for the planned Persian liquefied natural gas terminal. Fearful of the implications of this move, Tehran went on the charm offensive. Iranian authorities attempted to retain the two European majors by offering them stakes in other potentially lucrative South Pars blocks. This leads us back to the most recent announcement.

It seems Iran is putting a deadline on investment from the two industry giants as an attempt to get them to commit, as opposed to pushing them away. With foreign investment in development at the South Pars field, Iran will no doubt be able to start producing much sooner than it would without their involvement.