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Wed 18 Jul 2007 01:51 PM

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Turkey to invest $3.5bn in Iran gas

Country is set to invest in Iran's South Pars gas field, may team up with EU state already doing business in Iran.

Turkey will invest $3.5 billion in Iran's South Pars gas field starting from 2008, two senior Turkish energy ministry officials told Reuters on Wednesday.

The sources, who declined to be named, said that Turkey could also set up a partnership with a European Union member state that is already doing business in Iran.

Late last week Turkey announced that it had signed a deal to use Iran as a transit route for Turkmen gas and that it would also develop Iran's South Pars gas field to transport gas on to Europe.

Both Ankara and Tehran have made it clear that they see Iran as a potential partner for the EU and U.S.-backed Nabucco gas pipeline project, which was conceived as a way to diversify gas supplies to European markets.

Washington has voiced its opposition to the memorandum of understanding between Turkey and Iran, while the EU has not yet officially commented.

The United States, a NATO ally of Turkey, has no diplomatic ties with Iran. The U.S. Congress is considering legislation that would force President George W. Bush to impose sanctions on European and other companies that invest more than $20 million in Iran's oil and gas industry.

OMV TALKING TO IRAN

Austrian energy firm OMV, which has signed a memorandum of understanding with Tehran, says that it is still in talks with Iran.

"The negotiations continue and we expect to finish them by the end of this year," said OMV spokesman Thomas Huemer, adding OMV's only negotiating partners were the Iranians.

"We are only talking about our project, our participation in the development of (parts of) the South Pars gas field, an LNG project and contracts."

Iranian Oil Minister Kazem Vaziri-Hamaneh had said on Saturday details on developing the phases 22, 23 and 24 of South Pars gas field by Turkey would be finalised in four to six months.

The South Pars field is divided into phases with different sections going to different companies.

"Details ... will be studied next month when Turkey's energy minister visits and in four to six months the necessary agreements will be signed," Vaziri-Hamaneh said.

The minister added that the phases would be developed under so-called "buy back" terms.

Under Iran's buy-back terms, firms hand over operations of fields to the National Iranian Oil Company (NIOC) after development and then receive payment from oil or gas production for a few years to cover their investment.

 

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