IRAN - Shell & Repsol Want To Develop South Pars Gas For LNG; But Face Trouble.

Akbar Torkan, the CEO of Iran's state-owned Pars Oil and Gas Co. (POGC) says his firm has signed a contract with Shell and Repsol/YPF of Spain on developing the downstream section of two phases of the offshore South Pars gas field. This calls for an onshore plant at Assaluyeh to produce LNG for the European and Asian markets.

Because of Washington's sanctions, however, Iran cannot have the US liquefaction technology on which the LNG venture is to depend. Already an LNG project led by Total of France has been stalled since mid-2004 for the same reason. There are two other LNG export ventures in Iran - for a total of four JVs - which have been stalled.

There is an equally - if not more - serious problem affecting the LNG and other ventures based on South Pars gas. The entire petroleum sector of Iran and its petrochemicals business will be taken over by a radical faction of the Islamic Revolutionary Guards Corps (IRGC), which is taking control of Iran through a gradual military coup d'etat. It is said this faction controls Iran's nuclear development programme.

Akbar Torkan, a former minister of defence and the IRGC, belongs to a pragmatic faction of the Shi'ite theocracy, a faction which is moderate and led by former President Ali Akbar Hashemi Rafsanjani. The latter is chairman of the Expediency Council (EC), which is supposed to be powerful but is facing trouble from IRGC's radical faction. There is even the danger of Iran being attacked militarily on Western suspicions that it is developing nuclear weapons and the long-range missiles to deliver them to its enemies (see omt24-DubaiExchange-Dec12-05).

Torkan, who on Dec. 6 said his firm signed the contract with Shell and Repsol/YPF, might be among the first to be replaced by an IRGC appointee. This is because he was among the first moderates to say that the new IRGC-backed President Mahmoud Ahmadi-Nejad must openly apologise to former Petroleum Minister Bijan Namdar Zanganeh and other top officials at the state-owned National Iranian Oil Co. (NIOC) for having accused them as being part of "The Oil Mafia". Even before taking office in early August, the new hardline president had vowed to get rid of them.

Torkan on Dec. 6 said the deal with Shell and Repsol/YPF was part of an integrated mega-venture which was to develop Phases 13 and 13A of the South Pars (SP) gas field. He said Shell and Repsol had done studies on the initial engineering of these phases, and now they were carrying out the detailed engineering. He said Shell would extract the gas from the field to turn it to LNG.

In the upstream section of the project developing Phases 13 and 13A, Shell is the general contractor, and in the downstream section it holds 50% of the shares. The third partner in all this is a NIOC unit.

The NIOC unit, National Iranian Gas Export Co. (NIGEC), is to have a stake in two other LNG ventures - as well as full ownership or majority share in the fourth one. But POGC, NIGEC and other NIOC units might be restructured and their projects might be changed by IRGC appointees.

Unfortunately, no one knows what will happen to the petroleum sector and to Iran's gas export projects. Had Iran made a deal with the US to end all sanctions, it would have been able eventually to export up 100 million t/y of LNG and more than 100 BCM/year of pipeline gas to Europe and Asia.

Speaking about SP's Phase 11, Torkan on Dec. 6 noted that Total had taken the development project of that phase, and was currently conducting the studies. The French major would have a two-train LNG plant at Assaluyeh and carry out the marketing of up to 10 million tons/year. He said the market was to be mostly in Europe.

Last month, Torkan told the Iranian Students News Agency (ISNA) that the master development plan (MDP) for Phases 13 and 13A had been finalised after which the studies of the engineering were to be carried out and then the phases were to be put to tender.

The first important project Shell took in Iran was development of the offshore oilfields of Nowruz and Soroush. However, the Anglo-Dutch super-major is yet to complete them as scheduled. Completion of this project has been hindered by technical problems and work on the fields would take several months (see survey of Iran in Vol. 64, Nos. 13-16).