Wednesday, June 16, 2010

Iran Taps Local Firms to Develop Giant Gas Field


LONDON—Iran on Tuesday gave $21 billion in contracts to domestic companies—including one group tied to the Revolutionary Guards— to develop a giant gas field after failing to sign with Royal Dutch Shell PLC and Repsol YPF SA.

Iran said the deals proved it can shrug off international pressure over its controversial nuclear program after the United Nations agreed new sanctions. But experts doubt the domestic companies will be able to deliver the projects without the help of foreign majors.

Contracts to develop six phases of the South Pars gas field were signed Tuesday in the presence of President Mahmoud Ahmadinejad, said a spokesman for the Pars Oil and Gas Co., or POGC, which oversees the development. The spokesman said contracts to develop phases 13 and 14, for which Shell and Repsol had been in talks, were given to Iranian companies.

The two energy majors have held off for years on a final decision amid rising international pressure. Spokesmen for POGC, Shell and Repsol declined to comment on whether they had pulled out of the talks.

The deals may signal tighter control on the oil industry by companies connected to Iran's conservatives. Marine services company Sadra, which is tied to the Iranian Revolutionary Guard Corps, was part of consortium that won phase 13 along with three other phases.

Last year, a consortium led by Khatam al-Anbiya, the IRGC's engineering arm, agreed to buy 51% in Sadra. Khatam al-Anbiya was targeted under the new sanctions imposed by the U.N. Security Council though Sadra itself wasn't named in the sanctions.

Mr. Ahmadinejad said Tuesday's deals were evidence Iran can shrug off the impact of sanctions by working without Western companies. "Today, we see [Iranian] contractors with daring and self-reliance shouldering the burden," he was quoted as saying by state media.

But experts doubt Iranian companies are equipped to handle projects involving such large-scale and technologically challenging projects on their own.

"They don't have the capacity in terms of technology, personnel and capital," said Mehdi Varzi, a former Iranian oil official and president of consultancy Varzi Energy. He said "Iran needs Western oil companies" as they best master technologies in offshore fields and liquefied natural gas plants.

Iran has the world's second-largest reserves of natural gas, which include the South Pars field shared by Qatar. But their development has been delayed amid a lack of investment in a country faced with severe gas needs of its own and the impact of sanctions.

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