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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 on Wednesday.

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 say.

"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 Lasmo."

Iran 's gradual move towards letting foreign oil firms back onshore for the first time since the Islamic revolution has heightened political sensitivities.

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.


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.


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 Khosh field.

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 month.

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)).


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