UPDATE 2-Iran, Malaysia's SKS sign major gas deal

(Adds oil minister’s quotes, details)

TEHRAN, Dec 26 (Reuters) - Iran signed a multi-billion-dollar gas development contract with Malaysian group SKS on Wednesday, Oil Minister Gholamhossein Nozari said, sealing the kind of energy deal that has drawn criticism from the United States.

The National Iranian Oil Company and SKS, which is linked to tycoon Syed Mokhtar Al-Bukhary, reached a preliminary $16 billion deal in January to develop the southern Golshan and Ferdows gas fields and build plants to produce liquefied natural gas (LNG).

Nozari described Wednesday's signing as one of the biggest investment deals in Iran's energy sector, coming less than three weeks after China's Sinopec 0386.HK agreed to develop the huge Yadavaran oil field.

“Our main approach is ... Asian countries which are the focus of attention because of their future vast energy markets,” Nozari said, according to Oil Ministry’s Web site.

Iranian media said the two sides signed on Wednesday a contract with a total value of $16 billion.

But Nozari suggested in remarks broadcast on state television that it concerned only the upstream part, with foreign investment requirements of $6 billion. The part of the deal regarding LNG production, with investments estimated at $9-10 billion, would be ready for signing soon, he added.

Washington, which is leading efforts to isolate Tehran over atomic activities which the West fears may be used to build bombs, has sought to discourage foreign companies from investing in one of the world’s largest oil exporters.

But Malaysia, like Iran a mainly Muslim nation, has said it would not bow to U.S. pressure over its Iranian business links. Its state oil firm Petronas has a 10 percent stake in the Pars LNG project led by France's Total TOTF.PA.


Nozari said in January the contract would take 25 years to complete and that SKS would have 50 percent of the LNG, gas which has been cooled into liquid form, adding that the two fields contained 60 trillion cubic feet of gas.

Iran sits atop the world’s second largest gas reserves after Russia. But sanctions, politics and construction delays have slowed its gas development, and analysts say the country is unlikely to become a major exporter for a decade.

Economists have said many foreign firms, particularly Western companies, are increasingly wary of investing in the Islamic Republic after the U.N. imposed two rounds of sanctions on the country over its nuclear row since December.

But the country’s large oil and gas reserves still make it a magnet for international energy firms. On Dec. 9, Iran said Sinopec would invest around $2 billion to develop Yadavaran, a deal which drew a swift rebuke from Washington.

The United States is pushing for a third set of U.N. sanctions, even though a U.S. intelligence report said Tehran had halted its nuclear weapons programme in 2003.

Iran says it has never had plans to build nuclear bombs, insisting its nuclear work is peaceful and aimed at generating electricity so that it can export more of its oil and gas.

In January, the head of a key committee in the U.S. Congress called for a halt to trade talks with Malaysia after the preliminary gas development agreement was signed with Iran.

But a U.S. trade official last month said the United States and Malaysia planned to resume formal negotiations on a free trade agreement in early 2008. (Writing by Fredrik Dahl; Editing by David Stamp)