Published On: Mon, Apr 13th, 2009

Iran gives Shell/Repsol deadline on LNG project

Iran has given Royal Dutch Shell (RDSa.L) and Repsol (REP.MC) until May 20 to clarify their involvement in a major gas project in the Gulf, a senior oil official was quoted as saying on Monday.

“If subsequent to the expiry of the deadline these companies do not make clear their involvement in the Persian LNG project, talks will begin directly with Chinese (companies),” Seifollah Jashnsaz, managing director of the National Iranian Oil Company (NIOC), told the ISNA news agency.

“Presently not much remains to the end of this deadline,” he said, without giving further detail.

A Repsol spokeswoman declined to comment on the INSA report.

The Persian LNG project concerns development of production and exports of liquefied natural gas from a part of the South Pars field in the Gulf. Repsol, Shell and NIOC signed an initial deal in 2002 to develop Phase 13 of South Pars.

Last year, Royal Dutch Shell delayed decisions on multi-billion dollar investments in Iranian LNG plans due to political tension. Repsol has large investments in Iran, which is also the world’s fourth-largest oil producer.

Repsol said on its website that it and Shell signed a service contract for the Persian LNG project in January 2007, setting out the conditions for exploration and development operations in Phases 13 and 14 of South Pars.

It said production from those phases would feed a future LNG plant that would have two liquefaction trains, each with capacity for 8.1 million tonnes/year, but that a final investment decision had yet to be taken.

Iran sits atop the world’s second largest gas reserves after Russia, but sanctions imposed on the country over its disputed nuclear programme has slowed development of exports.

LNG is gas cooled to liquid under pressure for transportation in special tankers.

Iran has not yet exported any LNG but says it will be able to produce 77 million tonnes a year by 2014, more than double Qatar’s output after nearly two decades of steady investment.

The U.S. administration of former President George W. Bush pressured countries or companies that wanted to secure energy deals in Tehran to keep out, as the United States looked to isolate Iran over its controversial nuclear programme.

But relations could start to thaw as new U.S. President Barack Obama has offered direct talks with Tehran.