Foreign oil deals seen after Iran polls
By Andrew Mitchell
Feb 16, 2000 LONDON, Feb 16 (Reuters) - Iran 's slow grind towards new
oilfield deals with foreign energy firms could finally pick up pace once
Friday's parliamentary elections are out of the way, oil executives said
The end of the elections for Iran 's majlis (parliament) will free up
the attention of top economic policy makers to resume the slow process
of opening the country's economic lifeline to the outside world, analysts
"The government has instructed oil officials to sort some new deals
out by the end of this Iranian year (ending on March 19), but the officials
need to know who is going to be in charge before taking major decisions,"
said one Western oil executive.
While the oil opening enjoys a measure of broad political support, analysts
suspect a win for moderate reformists would bode well for Italy's Eni,
tipped to beat British firms Lasmo and BG for the big Darkhovin field.
"We are making good progress," said an Iranian oil negotiator.
"Darkhovin is a first priority and there could be a deal at any time."
Asked if there was a preferred candidate, he said "Maybe Eni, maybe
Iran 's gradual move towards letting foreign oil firms back onshore
for the first time since the Islamic revolution has heightened political
Hardliners remain acutely suspicious about foreign involvement, focusing
their criticism especially on Western majors accused of exploiting the
country for much of this century.
Oil Minister Bijan Zanganeh came under fierce fire from hardliners after
Royal Dutch/Shell won a deal in November for two offshore fields.
HIGH HOPES HELD BACK
While Iran set oil firms' pulses racing in 1998 by offering over 40
projects worth $8 billion-plus, a lack of management manpower in state
oil firm NIOC, initial worries about U.S. sanctions and tough Iranian terms
have bogged down progress.
Oil's economic importance to Iran places it at the heart of national
affairs and also encourages caution. "After Shell signed up we expected
other deals quite quickly but it's all gone quiet ahead of the election,"
said one foreign executive.
While mainstream conservatives did not join in the anti-Shell campaign,
they have sought to prevent Khatami and allies from getting credit for
any opening to the outside world.
Even a win for reformists would not guarantee progress on new partnerships
aimed at enhancing Iran 's big but technology-starved energy sector.
A substantial left-wing faction within Khatami's own coalition remains
suspicious of renewed outside investment. Foreign executives also fear
that further post-election reshuffles in the Iranian oil hierarchy will
also eat up time.
"The buy-back process has been excruciatingly slow. We see things
in an increasingly positive light but at best it will be three steps forward,
two steps back," said one executive.
The lack of new ventures has kept the government far short of its foreign
investment target this year.
With only Shell's deal finalised in the last 12 months, Oil Minister
Zanganeh is eager to make up some of the leeway, and Western executives
hope for at least one deal by the end of the Iranian year on March 19.
EUROPE CASHES IN ON U.S. ABSENCE
European companies are taking full advantage of the absence of U.S.
firms, banned by unilateral sanctions. Eni, potentially with France's Elf
Aquitaine, holds the whip hand on the prized Darkhovin field as it has
done work there before.
OMV is on its own for the Sarvestan and Saadat-Abad developments, NIOC
negotiators say, while Norsk Hydro and Cepsa are vying for the Cheshmeh
The World Bank's decision to consider renewed loans to Iran also confirmed
signs that access to international finance is starting to open up again.
And there are hopes for progress in long talks to develop more of Iran
's South Pars gas field - stalled since a TotalFina-led group's deal defied
U.S. sanctions two years ago.
A Shell consortium's talks to develop other parts of the huge offshore
field have been frustrated by a lack of agreement with NIOC on where to
send the gas.
Foreign firms hope for more clarity from a new 25-year "gas masterplan"
they want to develop with NIOC. They presented NIOC with a proposal this
Virtually all the main foreign players in Iran would be involved in
the eight-month study - including BP Amoco in what would be its first formal
step into Iran .
((London newsroom, ++44 171 542 5024, fax ++44 171 542 4453)).