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Shell, Repsol Offering New Proposal

Royal Dutch Shell and Repsol have offered a new proposal for the initial production in two phases of the South Pars gas field, oil minister said.

" Shell and Repsol have offered a new proposal for the initial production of phases 13 and 14 of South Pars gas field," Mehr News Agency quoted Gholamhossein Nozari as saying on Tuesday.

Shell , Europe's largest oil and gas company, teamed up with Spain's Repsol and signed a deal with the National Iranian Oil Company in January 2002 to invest in Phase 13, known as the 'Persian LNG'.

Reuters quoted the Madrid-based Repsol as saying on Tuesday, "The partners are discussing different options for the development of the liquefied natural gas (LNG) project but the content of those discussions is confidential."

Last year, Shell delayed decisions on multi-billion dollar investments in Phase 13 plans, reportedly due to political pressures from the White House.

In April, Iran gave Shell and Repsol until May 20 to clarify their involvement in the project. Phases 13 and 14 concern the development of production and exports of LNG, which is gas cooled to liquid under pressure for transportation in special tankers.

Nozari also said that France's Total had voiced interest in LNG production in South Pars Phase 11.

Iran last week signed a $4.7 billion deal with China National Petroleum Corporation (CNPC) to develop the upstream sector of South Pars Phase 11, saying it replaced Total because of the French company's repeated delays.

Total did not deny the report but said it was still involved in the project.

The French company was officially commissioned to develop Phase 11 of South Pars. However, Iran announced in March that it had found a new partner to replace Total in the project. The French company has been under US pressure to abandon cooperation in Iran's energy projects.

Deals & Speculations
Shell and Repsol last year pulled out of plans to invest in Phase 13, and not long afterwards French peer Total said it would hold off making fresh investments because of the "extremely delicate" political environment. This looked like posing a problem for Iran, as gas liquefaction requires substantial technical expertise that is difficult to get without involvement from a big international oil company.

Reports in the past week have suggested CNPC had taken over the role in the upstream project, and Petronas said it was still going to be involved and would work with CNPC, which would further suggest Total is firmly out of the picture.

The project being discussed involves two components; Phase 11, an upstream/exploration and production element; and the downstream LNG liquefaction plant, shipping, marketing and re-gasification.

The CNPC investment isn't 100 percent confirmed--though it's not at all unbelievable.

Finally, Total says it is still in talks on both the upstream and downstream parts of the project.

Involvement only in the downstream side would likely be less financially appealing to Total , and taking feedstock recovered and supplied by another company is not what the integrated majors like to do.

Petronas
Malaysia's state-run Petronas will partner with CNPC when the Chinese oil company takes over as the main foreign investor in the multi-billion dollar Iranian gas project, its chief executive told Reuters.

"I have been told by CNPC that they are taking over Total 's interests in the upstream and that they will become the operator for South Pars 11," Mohd Hassan Marican, Petronas President and Chief Executive, said in an interview.

Petronas is facing declining production at home, especially on the continental shelf of Malaysia, and crude oil and condensate output will be 650,000 barrels per day (bpd) this year, less than the 700,000 bpd forecast last year, and the company is pushing overseas to try to get new reserves.

"We remain positive with Iran, yes, it is not really the regulatory environment that's tough but it is also the external pressures not to invest in Iran," Hassan said. "This is an industry that is anchored on long-term, one needs to remain true to one's partners and not just plan to go in and out, depending on which way the wind blows," he said.

Hassan said Petronas would not step back on demands that its suppliers cut costs, despite the recent price gains. "Costs have not come down and you see that everyone's margins are being squeezed and in order for capex to be maintained, there needs to be a reduction in the cost."

© Iran Daily 2009