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    Chinese back in running for Neka pipeline

Middle East Economic Digest
June 4, 1999

The local Iran Power Plant Projects Management Company (Mapna) is in the final stages of negotiation with a Chinese consortium to finalise a contract for the construction of a 400-kilometre crude oil pipeline from the Caspian Sea to Tehran. An agreement on the $350 million project is expected by the end of June, National Iranian Oil Company (NIOC) officials say.

Mapna was awarded the contract by NIOC in December, on condition that it form a partnership with a Chinese consortium comprising China National Petroleum Company (CNPC) and Sinopec. The Chinese had earlier submitted one of the losing bids.

Mapna failed to agree with the Chinese and later held abortive talks with European firms including, reportedly, Initec of Spain and ETPM Entrepose of France (MEED 26:2:99). Mapna recently went back to the Chinese, "and they are now very close to agreement", according to officials.

The Neka-Tehran pipeline would carry up to 370,000 barrels a day (b/d) of oil from Kazakhstan and Turkmenistan for use in Iran's northern refineries. In exchange, Iran would offer equivalent amounts of oil to customers of Kazakhstan and Turkmenistan calling at Iranian terminals in the Gulf.

The project is on a build-operate-transfer (BOT) basis and is scheduled to start operating within about two years. State-owned Mapna has taken a high-profile role in energy projects in recent years, but NIOC is said to want direct involvement by foreign oil companies and traders able to guarantee supplies, and contractors able to guarantee project performance in order to secure financing and state insurance cover.

ECGD looks at oil and gas projects

The UK's Export Credits Guarantee Department (ECGD) is working towards an early resumption of insurance cover for UK companies bidding for oil and gas projects. At least half a dozen projects are being examined by the department as part of its "good projects" initiative on Iran launched in late 1998.

An ECGD underwriter was expected to visit the Bandar Khomeini petrochemicals complex in early June to examine a proposed utility plant project. The identity of the UK company bidding for the scheme and details of the project are not available.

ECGD is also considering a project related to onshore facilities for phases two and three of the South Pars gas field scheme. A source says talks are taking place with France, whose Total oil company leads a consortium developing the two phases (MEED 14:5:99).

Information on the remaining projects being examined by ECGD is not available. UK companies bidding for oil and gas projects include the Royal Dutch/Shell Group, BG, Enterprise Oil, LASMO and Premier Oil.

Tehran and London restored full diplomatic relations in May (MEED 28:5:99). ECGD started considering cover for projects in late 1998, but insurance will for the moment be provided under the so-called good projects initiative which sets conditions such as the creation of an offshore escrow account for payments (MEED 8:1:99).

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