February 19, 2008 / 4:03 PM / 11 years ago

UPDATE 2-Gazprom, Iran agree new large energy projects

(Adds Iranian comments, context)

By Dmitry Zhdannikov

MOSCOW, Feb 19 (Reuters) - Russia’s Gazprom (GAZP.MM), the world’s top gas producer, said on Tuesday it will take on big new energy projects in Iran, a move likely to anger the United States which wants Tehran isolated over its nuclear work.

State-controlled Gazprom, which supplies a quarter of Europe’s gas needs, said it had agreed to develop more phases of Iran’s giant South Pars gas field and drill in the country’s oilfields. Tehran said the deals had been “almost finalised.”

The deal could raise eyebrows of some investors in Gazprom, one of the world’s top 10 most valued stocks, as it seeks to boost its presence in the United States, which has urged foreign firms to cut business ties with Iran.

Gazprom said in a statement the deal had been clinched on Tuesday at talks between its chief executive Alexei Miller and Iranian Energy Minister Gholamhossein Nozari. It did not give any figures on investment.

“The two sides have agreed to jointly develop two or three blocks of South Pars as well as Gazprom Neft’s (SIBN.MM) participation in oil production projects in Iran,” the statement said. Gazprom Neft is Gazprom’s oil arm.

The shares of Gazprom closed 2 percent up in Moscow before the deal was announced and 2.16 percent in London (GAZPq.L) after the statement was released. The stock outperformed the broader MICEX oil and gas index .MCXOG. (To see a factbox on Gazprom’s global expansion click on [ID:nL19910558]

Gazprom, together with France’s Total (TOTF.PA) and Malaysia’s Petronas, has already invested in phases 2-3 of massive South Pars gas field, a project worth around $2 billion.

Between 2000-2007, Russia invested close to $4 billion in Iran, according to the U.S.-based American Enterprise Institute.


A top Gazprom official “will travel to Tehran in two months in order to finalise this round of negotiations,” the Iranian Oil Ministry’s news Web site SHANA quoted Nozari as saying.

The agreement takes place as Iran is calling on Russia to set up an OPEC-style gas group, an idea that has sent jitters among top customers and politicians in Europe.

Moscow says better coordination is needed between key gas producers and consumers but rebuffs the idea of a formal group which would influence prices.

Russia has been reluctant to impose more U.N. sanctions on Iran although it has voiced some concerns about Tehran’s nuclear ambitions.

Moscow is building Iran’s first nuclear power plant and has supplied the fuel it will use, despite U.S. concerns that Tehran is seeking to build atomic bombs. Iran denies any such intentions.

Iran holds the world’s second-largest gas reserves at 28 trillion cubic metres compared to 47 trillion in Russia, the world’s largest gas reserves holder.

Iran produces 100 billion cubic metres of gas a year, less than a fifth of Gazprom’s output of 550 bcm, but has ambitious plans to grow it further mainly due to South Pars.

“Gazprom has expressed a desire to be present in the upstream sector and also LNG (liquefied natural gas) projects,” Nozari was quoted as saying. At least one LNG unit would use gas from two phases of South Pars.

Iran has plans for several LNG projects but no plants operating and has been slow to develop its gas resources for export, which analysts say is partly due to U.S. sanctions. (Reporting by Dmitry Zhdannikov in Moscow and Edmund Blair in Tehran; editing by James Jukwey)

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