Blow to US sanctions against Iran
By Robert Corzine
July 28, 2000
Iran signed its biggest deal so far with a foreign energy group on Thursday
when it concluded a $3.8bn agreement with Eni of Italy to develop the South
Pars natural gas field in the Gulf.
The project with Eni is the latest blow to US attempts to limit foreign
investment in Iran's energy sector, which provides much of the country's
hard currency earnings and the overwhelming proportion of government revenues.
With reserves estimated at 12 trillion cubic feet of gas, South Pars
is one of the biggest gas fields in the world. Its development is a priority
for Iran, as it needs large quantities of additional gas to boost production
at ageing onshore oil fields. Tehran also hopes eventually to export gas
from South Pars, either by pipeline or in the form of liquefied natural
Vittorio Mincato, Eni's chief executive, criticised US efforts to isolate
Iran: "The (US) legislation is a joke. The only thing it has succeeded
in doing is preventing American companies investing in Iran."
Under the "buyback" contract, Eni is responsible for overseeing
and paying for the development of the field, which is then turned over
to the National Iranian Oil Company to operate.
The capital investment is then paid back to Eni along with an agreed
rate of return from proceeds from the field's production.
Many foreign companies are unhappy with the "buyback" contracts,
as they are inherently inflexible and potentially confrontational. But
they have proved to be the only contractual format that is politically
acceptable to Iran.