The Iranian

 

email us

US Transcom
US Transcom

Sehaty Foreign Exchange

    News & views

Oil companies poised for deals in Iran

PARIS, March 4 (UPI) -- In what are seen as new, emerging blows to U. S. government efforts to block large-scale oil investments in Iran, Western European, British and Canadian oil companies are on the verge of signing multi-billion dollar oil and gas deals in Tehran.

Industry and diplomatic sources say if deals now in the final stages of negotiation go through, U.S. oil companies seeking business in Iran will be left handicapped and on the sidelines, possibly for several more years.

John Lichtblau, president of the New York-based Petroleum Industry Research Foundation, said Washington had no support at home or abroad for its policy of isolating Iran by prohibiting energy investments there.

``The victims are American oil companies and their related business,'' he told United Press International. He and oil company executives predict there won't be good news for U.S. oil companies until the Iran- Libya Sanctions Act that seeks to isolate Iran expires in 2001.

Meantime, some 30 companies from nearly 20 countries, mainly in the European Union but also in Asia and Latin America, have submitted proposals for oil and gas development in Iran.

At least one project for offshore oil development involving British and Canadian companies may be signed shortly, probably before the end of this month.

A senior London-based executive of Britain's independent Premier Oil, who is also the leader of the project worth about $200 million, said today that signing with Iran was imminent. He added that the deal would involve developing the offshore Balal oil field to produce as much as 40,000 barrels of oil daily. Neither Premier nor its partner, Canada's Bow Valley Energy, seem worried about how Washington might react.

In Calgary, Dinesh Dattani, Bow's vice president for finance, said ``we are a small company, with no U.S. interests, and we are proceeding in Iran as quickly as we can,'' adding that everyone in the industry was monitoring Washington's reaction to the agreement signed in Tehran on Monday, the second involving a large French oil company.

The most recent agreement with the National Iranian Oil Company commits France's oil company Elf Aquitaine and Italy's ENI to redevelop the large offshore Dorood oil field in the Persian Gulf. The goal over 10 years is to raise its reserves from 600 million barrels of oil to 1.5 billion barrels, while substantially raising daily output. Elf's Iranian subsidiary will be the operator with a 55 percent stake in the joint venture. The company estimates the total cost of the project at around $998 million, including capital expenditures of $540 million, financial charges and payments to the consortium.

Despite a warning Tuesday by a U.S. State Department spokesman that the agreement might lead to sanctions under the Iran-Libya Sanctions Act, which prohibits any company from investing more than $20 million in either country's energy sector, not only Elf but other non-U.S. oil companies told UPI they are planning to defy the U.S. law. Some of the companies contacted in the past few days said they were counting on a waiver from the Clinton administration, arguing that Washington had no right to apply its laws to non-American companies based abroad, and that one waiver for a French oil company had already been granted.

``We have been told, and are confident, that we can expect the same treatment as Total,'' France's other large oil company, said Thomas Saunders, a Paris-based Elf spokesman. He was referring to an agreement reached last May between the European Union and the Clinton administration that allowed Total and its Russian and Malaysian partners to implement a $2 billion contract for gas exploration that had been signed in 1997, also in defiance of the U.S. law.

But following long and difficult negotiations, the administration granted a waiver on sanctions against Total, the operator, after EU leaders agreed to cooperate with Washington in helping curb possible Iran-led terrorism and in preventing Iran from acquiring weapons of mass destruction.

That agreement still holds and thus the French-Italian consortium should also be granted a waiver, along with other non-American companies preparing to sign deals, diplomatic and industrial officials in EU countries and North America told UPI. Other companies that have submitted proposals for developing Iran's oil and gas fields include Royal Dutch Shell, BP Amoco, both with predominant British shareholding, and Los Angeles-based Arco.

Some awards involving non-U.S. companies are expected to be announced by March 20, the end of the Iranian year, according to the Petroleum Intelligence Weekly newsletter, published in New York. There is widespread industry speculation that Shell will be among them, supported by Iran's moderate President Mohammad Khatami, who views the contracts as a way of bringing in badly-needed oil revenues while boosting Iran's role as a major oil producer. BP recently opened a Tehran office, industry sources said.

Despite the current low level of world oil prices -- Iran's light crude has been selling at about $6.50 a barrel on the spot market -- companies say deals in Iran make business sense. According to industry analysts, the recent collapse of energy demand in Asia seems to have bottomed, while strong economic growth, particularly in the United States and to a lesser degree in Europe, means that the world oil glut will shrink substantially, meaning a potentially profitable market for Iranian oil.

Given the relatively low costs of developing oil and gas in Iran, the PIW newsletter reports that it offers high rates of return even at current oil prices, averaging an estimated 20 percent annually at the Balal field and between 13 percent and 18 percent at the Dorood field. Companies are being paid through buyback contracts that reimburse companies for supplying capital and technology in the form of crude oil or gas.

Meantime, although U.S.-Iranian relations have improved slightly since President Khatami was elected two years ago, the sanctions law is still on the books, while some hard-line Iranians remain hostile.

``The deal (signed with Elf and ENI) is yet another success for Iran in boosting political and economic relations with other countries and defeat for the White House to isolate our country through sanctions,'' an Iranian state radio commentator said earlier this week.

Meantime in Washington, the State Department has repeatedly said it remains ``strongly opposed'' to oil and gas investments in Iran, that the Elf-ENI deal will be carefully examined, and that a waiver was by no means automatic.

Administration sources have indicated that sanctions may still be applied to Elf, because, unlike Total, it has substantial oil and chemical interests in some 50 locations in the United States that would be vulnerable to possible punitive action under the law.

If Washington were to move against Elf or ENI, it would trigger immediate protests from the French government and the European Commission in Brussels, the EU's executive body, and possible retaliation against U.S. interests in the 15-nation EU area, diplomatic sources said.

``I don't believe any of us in the EU want a new trade war over Iran, '' a senior French official said, adding ``we notified the State Department of what Elf was doing beforehand, believing firmly that improving economic and cultural links is by far the best way to stabilize the situation in Iran.''

Links


Copyright © 1997 Abadan Publishing Co. All Rights Reserved. May not be duplicated or distributed in any form

 MIS Internet Services

Web Site Design by
Multimedia Internet Services, Inc

 GPG Internet server

Internet server by
Global Publishing Group.