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Wed 27 Jun 2007 12:26 AM

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Iran signs Oman gas export deal

Iran will export gas to Oman in a deal that could open up new routes well beyond the neighbouring state.

Iran has signed a deal to export gas to nearby Oman that could open new export routes for the Islamic Republic well beyond the neighbouring Arab state.

Under the agreement signed late on Monday, the Iranian Oil Ministry Web site said Iran would export 1 billion cubic feet of gas to Oman, a small gas producer itself which already has an export terminal to make liquefied natural gas (LNG).

LNG plants cool gas into liquid so it can be shipped beyond the range of pipelines but Iran's efforts to build its own LNG facilities have faced delays, in part because U.S. sanctions on Tehran deter investors and block access to some technology.

Iran, which sits on the world's second largest gas reserves, now exports only modest amounts of gas by pipeline.

Omani Commerce and Industry Minister Makboul bin Ali bin Sultan, who signed Monday's deal with Iranian Oil Minister Kazem Vaziri-Hamaneh, suggested the main aim was to meet Omani needs.

"In future Oman needs a huge amount of gas, so we are negotiating with Iranian officials to buy gas from Iran. The joint cooperation project ... does not include just gas imports but also exploring, extraction and transfer by pipeline to Oman," he was quoted by the Web site SHANA as saying.

Analysts say Iran could use Oman as a transit route for its gas, which could be processed at Oman's Qalhat LNG plant. The plant can make just under 10 million tonnes of LNG per year.

"Potentially you could have Iranian gas actually being piped to Oman and then liquefied and sold on international markets," said Stuart Lewis, Middle East director at energy consultancy IHS. The project was in its early stages but there were signs it would move ahead quickly and both sides were looking at finalising the deal in September, Lewis said.

DEVELOPING FIELDS

"If you contrast that to all the projects under consideration and haven't come to fruition, this project could be quite significant," Lewis added.

Iran has had long-running talks with India and Pakistan about an export pipeline without securing a deal and France's Total has said spiralling costs and geopolitical concerns could delay its involvement in an Iranian LNG project, which has already been pushed back to 2011 from 2009.

Oman and Iran signed a preliminary gas deal in May. At the time, Oman's official news agency said LNG exports of Iranian gas could be marketed by a joint Omani-Iranian company.

The deal signed on Monday included developing the Hengam and other fields, SHANA reported.

Hengam is a joint field, which is known as West Bukha in Oman. It was not clear if the development plans envisaged in the deal covered just Iranian areas of that field or the whole area.

"Before signing the agreement, the two sides agreed on exporting Iran's gas, developing Kish gas field, Oman's investment in Iran's oil and gas fields, including Hengam fields and developing these fields by the Iranian team and establishing a joint investment company," SHANA reported.

Iran and Oman have been discussing developing the Hengam-Bukha field for years. It holds around two trillion cubic feet of gas and is off the coast of Oman in the Strait of Hormuz at the mouth of the Gulf between the two countries.

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