Iranian Oil Ministry Close To Awarding $1.6 Billion Contract For South Pars Gas Field

Iran's oil ministry is close to awarding a $1.6 billion contract for phases 9 and 10 of its South Pars gas field to a consortium headed either by Korea's LG Construction Co. or France's Technip-Coflexip, head of the Pars Oil and Gas Company said Monday. Asadollah Salehi-Foruz said a deal should be signed "in a maximum of two weeks...after some further technical clarification is carried out on the contracts." He declined to comment on which of the two groups would be awarded the development deal, but other Iranian sources say the group headed by Korea's LG is favorite.

Several other Korean companies, including Samsung Corp. and the Daewoo International Corp. could also join LG in developing part of the world's largest gas field. Iranian consultants, Sun Fire, could also participate in one of the consortiums. Salehi-Foruz said the contracts, which span both onshore and offshore development, will be awarded through a mixture of direct financing and under Iran's buyback scheme. Under buybacks, a foreign company recovers its investments and gets a profit by receiving part of a project's output.

Iran's plans to become a major gas exporter hinge heavily on the development of South Pars. Both, Iran and Qatar each hold reserves of 460 trillion cubic feet of gas in Pars. Qatar's share of the field is known as North Pars. Iran has so far raised $7 billion of investment for the first eight phases of a planned 25-phase development of South Pars.

In related news, Iran has signed a $32 million contract for the construction of three offshore drilling platforms, according to state-run Tehran radio. The National Iranian Oil Co. contracted a state shipbuilding company to manufacture three oil rigs for phases six to eight of the giant South Pars gas field in the Persian Gulf. The contract states that the rigs should be in place within a year.

A consortium made up of Petropars and Shell Group's Enterprise Oil is in charge of the development of the three phases, which are slated to go on stream by 2006. Shell, which gained control of Enterprise Oil in May, has yet to say whether it will exercise Enterprise's option to develop South Pars phases six to eight.

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