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Iran In Talks On S Pars Gasfield With Shell,Gazprom-Paper

April 13, 2000 TEHRAN -(Dow Jones)- Iranian oil officials are negotiating the development of phases four and five of the South Pars gasfield with Royal Dutch/Shell (RD) and OAO Gazprom (R.GAZ), the " Iran Daily" newspaper quoted an oil ministry source as saying Wednesday.

" Iranian officials are holding talks to finalize a buyback contract worth $1.5 billion for the development of the gasfield with an oil consortium led by Royal Dutch Shell and Gazprom," he said.

In January, the National Iranian Oil Co. (C.NIO) said it was negotiating with international oil companies to develop the next five phases of the South Pars gas project in the Persian Gulf and hoped to finalize deals by March.

Phases 1 to 3 of the project have already been awarded, phase 1 to a local company and phases 2 and 3 - estimated at a cost of $2 billion - to a consortium comprising France's Total SA (TOT), Russia's Gazprom (R.GAZ) and Malaysia's Petronas (P.PGS).

Reserves at the field are estimated at 436 trillion cubic feet.

Phase 1, with a capacity of 1 billion cubic feet of natural gas a day, will become operational by late 2001. Development of phases 2 and 3 is expected to start at the end of next year.

Phases 4 and 5 are expected to add 1 billion cubic feet a day to the project's capacity. The whole project comprises 25 phases.

Under a buyback structure, companies investing in Iran 's energy sector are repaid for their investment in oil or gas from the field once production begins.

In November 1999, Shell signed a contract with NIOC to develop the offshore Soroush and Nowruz oil fields located off Kharg Island in the Persian Gulf at an estimated cost of $800 million.

At that time, the company said it was also bidding for a number of other projects.

Shell Overseas Services Ltd. Iran couldn't been reached for comment Thursday.

However, a spokesman for the company in London said the local report is consistent with Shell's policy in Iran , and that it has previously expressed an interest in the South Pars project.

Iran , which owns the world's second largest gas reserves after Russia, estimated at 20 trillion cubic meters, opened its oil and gas sector to international tender in July 1998.

A handful of contracts have been signed so far despite U.S. sanctions against the country.

Under the 1996 Iran -Libya Sanctions Act, or ILSA, international companies can't invest more than $20 million a year in Iran .

When Shell signed its contract in November, the U.S. launched an investigation to ascertain whether the deal violated ILSA.

The U.S. has issued a waiver on phases 2 and 3 of the deal which was signed in 1997.

 

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