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Iran Awards South Pars Gas Contracts to Chinese, Malaysian and Indian Companies

Iran announced that it is awarding major gas contracts to Chinese, Malaysian and Indian firms for its extensive South Pars natural gas field, rather than Western companies originally expected to win the concessions. Western companies have been reluctant to commit to Iranian oil and gas projects as the U.S. seeks to impose new sanctions on Tehran.

Iran's oil minister Masud Mir-Kazemi indicated Saturday that Tehran was planning to replace Western oil companies, which he accused of "dragging their feet for years" in the development of the vast South Pars natural gas field, reputed to be the world's largest.

Oil Minister Mir-Kazemi told Iran's semi-official Mehr news agency that Tehran notified foreign companies that it would "no longer negotiate with them and would hand over development of the (South Pars) projects to domestic companies."

U.S. and U.N. economic sanctions on Iran have caused many Western oil and gas firms to avoid investing in Iran or to pause in pursuing previously announced contracts.

Some non-Western companies, including the Chinese National Oil Company (CNOC) have, however, sought to supplant their reluctant Western counterparts. An official of Iran's Oil Ministry, Ali Vakili, says that China and others have signed deals:

Vakili says that the Iranian National Oil Company and the oil ministry are announcing the investment of $5.5 billion by the Chinese National Oil Company, along with Indian, Malaysian and Iranian oil firms in different phases of the extremely rich South Pars natural gas development project.

Houchang Hassan-yari of Canada's Royal Military College insists that Iran is being forced to turn to various third world countries to help develop its oil and gas infrastructure, as Western companies become more reluctant to invest due to current and future sanctions on Tehran. "The American, French, Italian and British companies are respecting the sanctions that are imposed by Americans on the Iranian oil and gas activities. So, it means that Iran doesn't have any other choice but to go to the third world countries: those countries who are willing to invest in Iran and who are not as vulnerable to sanctions imposed by Americans and others," he said.

Hassan-yari argues that it is unlikely that Iran will revoke contracts now being awarded to Chinese, Malaysian and Indian firms, but that Iran's oil and gas sector is so large and in such need of investment that it probably will be possible to participate in the future, if Tehran resolves its nuclear standoff with the West. "When you give a long-term contract to Chinese and others, it would be extremely difficult to go back and ask those companies to leave the country and replace them by Western companies. But, the Iran energy sector is extremely rich and also extremely in need of investment, so there is always a place for Western companies."

Iran's oil minister indicated recently that Tehran needs to invest about $200 billion in its energy sector during its current five-year plan, but voiced concern that it might be difficult to reach that target.