Eni Iranian oil deal may test US sanction policy
Financial Times, July 2
BY GUY DINMORE IN TEHRAN
Eni, the Italian energy group, has broken new ground in Iran by signing a $920m (GBP654m) oil contract linked to unprecedented performance-related payments likely to set the trend in Tehran's negotiations with other western oil giants.
With development of the onshore Darkhoein field, its fourth major oil and gas project in Iran, Eni will be the largest foreign contractor to Tehran. It may also become the focus of concern for the US which has sought, with little success, to curb investment in Iran's energy sector.
The US Congress is debating whether to extend, for five or two years, the Iran-Libya Sanctions Act (Ilsa) that permits the president to impose penalties on non-US companies investing in the energy sector of those two countries.
But European oil companies appear confident that President George W. Bush will not risk a trade war by levying Ilsa sanctions, which have never been imposed since the act became law in 1996.
US oil companies are barred from working in Iran under separate executive orders issued in 1995.
Analysts in Tehran said Iran's clerical regime wanted to demonstrate to the US the failure of its oil sanctions. But more interesting to oil majors such as Shell, BP, TotalFinaElf and a Japanese consortium, all negotiating their own future deals, was the nature of the Eni contract that provides for incentives and penalties linked to performance.
Iran's constitution forbids foreign companies from holding production-sharing agreements or operating oil fields. But under the "buy-back" system introduced in 1995, overseas groups develop fields to be handed over to the Iranian operator which then pays a pre-agreed amount with the oil produced.
After what Vittorio Mincato, Eni CEO, described as "long and complex" negotiations, the two sides agreed on a modified formula whereby the National Iranian Oil Company (NIOC) would have "sole control" over operating the field, but Eni would be part of a joint "production marketing committee".
In the second stage of developing Darkhoein, with output set to reach 160,000 barrels per day (bpd), payment to Eni would be linked to 16 production tests over four years, a joint statement said.
NIOC has the right after the first two-year stage of development, when output is targeted at 50,000 bpd, to decide whether to proceed with the next stage. Penalties are also set if Eni fails to meet Iranian content. |
