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Financial Times: Total defies US with vow to continue Iran oil drive

By Carola Hoyos in London
Published: September 8 2006 03:00 | Last updated: September 8 2006 03:00

EXTRACT: Royal Dutch Shell, the Anglo-Dutch energy group, is developing the Soroosh and Nowrooz oil fields and last year signed on to help develop South Pars, the world’s biggest gas field.

THE ARTICLE

Total has vowed to continue efforts to develop Iran’s vast oil and gas reserves, saying yesterday it would not have its hands tied by US attempts to isolate Iran by preventing international companies from investing there.

Thierry Desmarest, chief executive, said in an interview yesterday that the French energy group would respect decisions made by the French government, the European Union and the United Nations regarding Iran but that US regulations were the problem of US companies.

“We will always fully respect all the decisions made at the level of the French government, the European Union and the United Nations,” he said.

Total, the world’s fourth largest listed energy group, intends to help develop Iran’s huge natural gas fields and is continuing discussions with Inpex, Japan’s state oil company, to take a stake in a $2bn (€1.6bn, £1bn) project to tap Iran’s Azadegan oil field.

This strategy, also being employed by several of Total’s rivals, challenges the foreign policies of the US, which has sought sanctions against Iran if it does not shut down its nuclear enrichment programme.

“To get the satisfactory energy supply at a world level, Iran is necessary. It is already necessary in both oil and gas,” he said. Total’s priority in Iran was liquefied natural gas, he added, saying discussions with Inpex had not ended. “If we join, it will be with a small stake.”

Iran’s oil and gas reserves are the world’s second largest. International interest in developing fields is growing despite efforts by the US and UK to isolate Iran because of its nuclear ambitions.

The US threatens to impose sanctions on any non-US company doing business in Iran; however, the law used to do so, passed by President Bill Clinton, has rarely been enforced. Sanctions against Libya that were part of the same act used for Iran have been lifted.

While some companies, put under pressure by the US, have played down their interests in Iran as relations between Tehran and the west have deteriorated, many are moving ahead with projects.

Royal Dutch Shell, the Anglo-Dutch energy group, is developing the Soroosh and Nowrooz oil fields and last year signed on to help develop South Pars, the world’s biggest gas field. Other foreign companies active in Iran include Norway’s Statoil, Spain’s Repsol, Austria’s OMV, Brazil’s Petrobras, Italy’s Eni and the two Chinese national oil companies CNPC and Sinopec. The majority of these companies are partially or totally owned by their governments.

France and China are both veto-holding members of the UN Security Council and have, together with Russia, resisted US and UK calls for possible sanctions.

The biggest problem for energy companies looking to invest in Iran has been Iran’s tough contractual terms rather than diplomatic issues, according to Mr Desmarest and other industry executives. “Negotiating with Iran has never been simple,” said Mr Desmarest.

Leo Drollas, deputy executive director of the Centre for Global Energy Studies, the London-based consulting group, said: “Iranians want to treat the companies as banks and service operators . . to put up the money, take the risk, do all the hard work and then to push off.”

Copyright The Financial Times Limited 2006

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