Shell says it won't join Iran oil project
By BRUCE STANLEY
AP BUSINESS WRITER
February 24, 2004
LONDON -- Royal Dutch Shell Group of Cos. won't join a Japanese-led project to develop one of Iran's biggest oil fields because the terms the deal aren't profitable enough, the company said Tuesday.
A consortium backed by the Japanese government announced the $2 billion project last week, overriding U.S. objections that the money could end up paying for nuclear weapons development and terrorist activities.
Three Japanese companies - Inpex Corp., Tomen Corp. and Japan Petroleum Exploration Co. - will control 75 percent of the Azadegan oil field, with Iran's national oil company holding the remaining 25 percent.
Although Shell acted for several years as a technical adviser to the consortium, it decided not to exercise an option to become a partner in the project.
"The terms and conditions of the deal between the Japanese companies and Iran do not look attractive against Shell's current project economics criteria," Shell spokeswoman Bianca Ruakere said.
Inpex, a government-affiliated exploration company, has reportedly been seeking other foreign partners to help develop and operate Azadegan. Shell was a natural candidate. It already produces oil at two fields off Iran's Gulf coast - Soroush and Norwooz - where it aims to pump an average of 190,000 barrels a day this quarter. It also manufactures petrochemicals in Iran.
Shell hasn't formally announced that it won't join, and it still has the option to do so. However, it has decided that the project as it exists probably wouldn't generate enough cash to justify Shell's participation, Ruakere said.
Azadegan, near Iran's border with Iraq, is estimated to contain 26 billion barrels of crude. Iran's proved reserves are estimated to total 90 billion barrels.
Japan, which lost oil rights in Saudi Arabia in 2001, depends on crude imports for almost all its needs, and Azadegan could become an important new source.
But Azadegan is a "complicated" geological structure, said Manouchehr Takin, an analyst with the Center for Global Energy Studies in London. "There are different layers to it. It's not just one big, prolific field."
The involvement of experienced foreign partners could help reduce the development risks for the Japanese, Takin said.
Norway's Statoil and Total SA of France are two other foreign oil companies that have expressed interest in developing Azadegan.
Inpex, Tomen and Japan Petroleum initially won exclusive rights to develop the field. They backed off under U.S. pressure but resumed talks late last year after Iran signed an additional protocol to the Nuclear Non-Proliferation Treaty that allows for unfettered inspections of its nuclear sites.
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