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Iran says South Pars phase to come on stream soon

TEHRAN, May 11 (Reuters) - A section of the huge South Pars gas field that is operated by StatoilHydro STL.OL will start production soon, a senior Iranian energy official said on Sunday, after a two-year delay of the $2.7 billion project.

Mohammad-Javad Shams, board member of the Pars Oil and Gas Company, was speaking a day after Royal Dutch Shell RDSa.l said it had pulled out of developing another phase of South Pars, after pressure not to participate from U.S. lawmakers.

Washington is spearheading a drive to isolate Tehran over its disputed nuclear ambitions. Western powers fear Iran is seeking to build nuclear bombs. Tehran rejects the charge.

Shams declined to comment on Saturday’s statement by a Shell spokeswoman but said South Pars phase eight would start up in the Iranian month that begins on June 21, followed by phases six and seven. Statoil handles the offshore part of the project.

He said they would reach full production capacity of 1.3 billion cubic feet (33.8 million cubic metres) each of natural gas per day by the end of the 2008-09 Iranian year next March.

“(This) is about 300 million cubic feet above the yield from other phases which stands at one billion cubic feet a day,” said Shams, who is project manager of South Pars’ phases 6-8.

Shell, Spain's Repsol REP.MC and the National Iranian Oil Company (NIOC) signed a Memorandum of Understanding in January 2002 to develop phase 13 in a project to be 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, and criticisms of the deal from U.S. politicians and investors, slowed progress.

“My information is not complete in this connection, so let me not make any comment on this,” Shams said when asked about Shell’s plans to pull out of phase 13.

On the part of South Pars with StatoilHydro involvement, Shams said production would initially amount to 400 million cubic feet at phase eight.

He blamed delays in the project, which had been due to start operating in 2006, on costs: “We have faced the issue of increase in contract prices since 2003 in the international energy market.”

Of the total investment of $2.683 billion, Statoil is responsible for $300 million while an NIOC unit stands for the rest, Shams said.

Iranian officials have previously estimated South Pars’ full production potential at 700 million cubic metres per day, requiring 24 phases. They said last year the first five were finished and pumping 135 million cubic metres per day. (Writing by Fredrik Dahl; Editing by Rory Channing)

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