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Iranian oil contracts (fwd)



This may give you a flavor of contractual relations between oil producing
countries and multinational oil companies - in this case Iran and a bunch
of big companies.

*****************************
Clement M. Henry
Professor of Government
University of Texas at Austin
Austin TX 78712
tel 471-5121, fax 471-1061

---------- Forwarded message ----------
Date: Sun, 1 Sep 2002 13:35:08 -0400 (EDT)
From: Gary G Sick <ggs2@columbia.edu>
To: gulf2000 list <gulf2000-list@columbia.edu>
Subject: Iranian oil contracts

Date: Sun, 1 Sep 2002 18:56:42 +0330
From: Siamak Namazi <snamazi@atiehbahar.com>

I've been getting a lot of calls today from our clients and from various
reporters asking about a Reuters story that suggested Iran has put a
one-year freeze on signing oil deals with foreign firms.

Unfortunately, as the NIOC Public Relations Office would tell you, Reuters
misunderstood Zanganeh's remarks, causing a bit of havoc.

Below I have the **draft** on our version of the story to clarify the
issue for G2K members.

Best regards

Siamak Namazi
Director, Risk Management & Strategy
Atieh Bahar Consulting (Tehran)
& Co-Editor, Iran Energy Focus

Zanganeh's New Explanation for Delays in Signing Oil Deals
--------------------------------------------------------------

Petroleum Minister Bijan Namdar Zanganeh told the ISNA on 30 August that
Iran's reluctance in entering contracts with foreign firms in the past
year was due to lower oil demand in the global oil market, which took away
any urgency for the country to raise production capacity.

"The delay in signing buy-back deals is not due to any problem we might
face," the minister claimed". "The only reason for this policy is that,
given the fall in demand, we have seen it more desirable to delay signing
deals for a year," he said, adding, "besides, we do not need to produce
beyond our output capacity and can always use these resources."

The Iranian petroleum minister's latest explanation on why we are
witnessing delays in the signing of oil contracts is different than the
reasoning he offered only weeks earlier. In a 10 August press conference
Zanganeh had said that there is so much pressure on him that the managers
in his ministry "fear" entering contracts with foreign entities.

It is worth noting that Zanganeh's more recent explanation came after
Iranian Supreme Leader Ali Khamenei on 26 August, talked to Mr. Khatami
and his ministers and told them that managers should not be afraid of
carrying out their duties.

Although there is no way to know whether or not the Supreme Leader was in
fact addressing Zanganeh, the Petroleum Minister's renewed confidence
suggests that he could once again triumph over his opponents and cling on
to his position. At the very least, the minister has adopted a much more
self-assured tone and has decided to launch a media campaign aimed at
explaining his achievements to the public.


THE NEXT CONTRACTS

In comments made on the same day as the Supreme Leader's address to the
Cabinet, Zanganeh indicated that the contracts for development of two
giant onshore oil fields of Bangestan and Azadegan will be inked by the
end of the current Iranian year (March 2003).

Naturally, Iran would have to improve the terms it is offering for these
deals before it can hope to attract any serious players, particularly the
frontrunners for the deals.

A good signpost to gauge whether Zanganeh's latest statements is mere
wishful thinking, or that he has good reason to sound more confident, will
be reflected in his ability to finally fulfill the longstanding promise to
sign the South Pars 9 & 10 project.

For months now the minister has promised to ink that deal within "a week,"
but has failed to do so. He now says that the deal will be sealed by the
end of the Iranian month of Shahrivar (20 September 2002).

Korean LG leading a consortium with Iranian OIEC is expected to win the $2
billion contract.

Four oil giants - BP, ENI, Royal Dutch/Shell and TotalFinaElf - made bids
over a year ago for the Bangestan contract, the oil field which is
eventually expected to produce around 650,000 barrels of oil a day at an
estimated cost of $3 billion.

Iran is also in talks with Japanese companies over Azadegan development,
which is estimated to have a capacity of 47 billion barrels of crude,
yielding 600,000 bpd once operational. Last year, Japan agreed upon
receiving privileged rights for negotiating the development of Azadegan
oilfield, to grant a $3 billion loan to Iran. This agreement was signed
during President Mohammad Khatami's trip to Japan. The loan was agreed to
be given to Iran in three installments, two of which have already been
disbursed.

Last month, Japan made the payment of third installment of its $3 billion
loan to Iran conditionally on having priority in negotiations of Azadegan
oilfield development project.


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