Shell out of Iran gas deal

Shell out of Iran gas deal
Tom Bergin, THE NATIONAL

Last Updated: May 10. 2008 8:50PM UAE / May 10. 2008 4:50PM GMT

Royal Dutch Shell has pulled out of a planned US$10 billion (Dh36.7bn) gas project in Iran, after coming under pressure not to participate from US lawmakers who were concerned about the country’s nuclear programme.

A spokesman said yesterday that the world’s second-largest oil company by market capitalisation was pulling out of Phase 13 of the giant South Pars gas field, but may yet join later stages of the field’s development.

Shell, Spain’s Repsol and the National Iranian Oil Company (NIOC) signed a memorandum of understanding in January 2002 to develop Phase 13 in a project known as Persian LNG.

At the time, Shell said deliveries of liquefied natural gas – gas cooled to liquid under pressure for transportation in special tankers – could begin in 2007.

However, United Nations sanctions on Iran related to its nuclear programme, which it claims is for power generation, but which the US and European states believe is aimed at developing weapons, and criticisms of the deal from US politicians and investors, slowed progress.

Meanwhile, Iran grew impatient and threatened Shell with eviction from the project if it did not commit formally. The spokesman for the Anglo-Dutch company said: “We have agreed the principal of substitution of alternative later phases for the PLNG project so that NIOC can proceed with the immediate development of Phase 13.”

She would not give a reason for the decision. Repsol was not available for comment.

Iran will now need to find new partners for the project. Media reports have suggested Russia’s Gazprom, Indian Oil Corporation and Chinese companies could join, as they were expected to be less susceptible to US political pressure, but the companies have limited experience of LNG.

Shell and Repsol began negotiating with the Iranian government to pull out of the natural gas project at the beginning of this month. The companies wanted Iran to agree to drop their current development plans for block 14 of the South Pars field, but to allow them to bid for other parts of the field in the future if the international political climate improved.

On May 3, a Repsol spokesman declined to comment on the report. Shell and Repsol had planned to export South Pars gas via ship in liquefied form as part of the Persian LNG project. Now, it is more likely the gas will supply the Iranian market or be exported by pipeline.

The US discourages Western companies from investing in Iran, which it accuses of trying to develop nuclear weapons. Iran denies the accusation.

* Reuters