Shell and Repsol Getting Closer to Iran’s Top Gas Field

The Spanish business paper Expansion recently broke a story revealing that Royal Dutch Shell and Repsol are close to signing a service contract deal with the Iranian government to work on phases 13 and 14 of the South Pars gas field. The $4.3 billion deal will involve the construction of a major liquefied natural gas plant, which could have the capacity to export 16.2 tons of LNG a year. Next to Qatar’s North Field, Iran’s South Pars reserve is one of the largest, most sought-after natural gas fields in the world From the FT:

Shell and Repsol would each own 25 per cent of the project, called Persian LNG, with the National Iranian Oil Company holding the remainder and retaining ownership of the reserves. The document suggested the gas could be sold in Asian countries including China and Japan. Iran has been interested in attracting foreign investment into its gas and oil industries to boost production. However, doing business there is overshadowed by the threat of further economic sanctions. International companies also report deep difficulties in dealing with bureaucracy. Shell’s interest in Iran is testimony to the challenges it and other international oil companies face in finding new sources of oil and gas. US legislation introduced in 1996 and renewed last year imposes sanctions on non-US companies investing in Iran’s oil industry. … “Given Iran’s flouting of UN resolutions over the development of its nuclear programme and US concerns about Iranian interference in Iraq, it seems to me that the US administration will be much more sensitive about this sort of investment,” said Jeffrey Schott of the Peterson Institute for International Economics in Washington.

According to the guys at the Oil Drum, the export of Iranian gas from South Pars is not quite a sure thing due to high domestic consumption of the new supplies. They quote the following from a Stuart Lewis IHS report:

“Iran needs some 1 bcm/d of gas for its own domestic use, which means there is no surplus gas for export gas in the next twenty years” – Kamal Daneshyar, Chair of Energy Commission of Majlis (07/05) and “Gas export is one of the objectives to be pursued within the frame of ‘Iran’s 20-year prospect plan’” – Roknoddin Javadi, MD of National Iranian Gas Export Company (07/05)”.