Iran, Japan Azadegan contract may end

May 25, 2006 at 12:39 PM
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TEHRAN, May 25 (UPI) -- The Iran-Japan Azadegan oil field development contract may be terminated, Kyodo news agency reported Thursday.

Mehdi Bazargan, managing director of Petroleum Engineering and Development Co., told Kyodo the contract, which was signed in February 2004 by Japan's government-linked oil developer Inpex Corp., National Iranian Oil and its subsidiary, may be terminated in September as no major progress has been made.

"In the contract, there is two years and six months (to implement the project)... (After the deadline), the contract will be terminated automatically," he said. "Extending the deadline is not written in the contract. We haven't thought of it."

Petroleum Engineering and Development is an affiliate of the National Iranian Oil Co., and is responsible for negotiating the terms of the development project with the Japanese companies involved.

Japanese Chief Cabinet Secretary Shinzo Abe said his government plans to go ahead with the project, which it sees as key to a stable energy future.

"We would like to move forward in line with the contract," he told reporters.

Inpex plans to begin production work on the Azadegan field in 2007, eventually producing more than 400,000 barrels per day.

But delays in implementing the main stages of the project -- caused by delays in the removal of land mines in the area, Inpex says -- have put the development project behind schedule.

Bazargan admits the mine removal is the National Iranian Oil Co.'s responsibility under the terms of the development contract, but says: "I don't think the main obstacle is mine clearing or demining."

The United States has been vocal in its opposition to the project, but Bazargan said that he did not think U.S. pressure on the Japanese government was causing delays in the work.

"Usually the Japanese government has a very positive attitude. So I cannot actually say anything about the intention of the Japanese government," he said, adding that Inpex had said "this amount of CAPEX (capital expenditure) is not enough," and the concerns were purely financial.

The Azadegan oil field is one of the largest in the world, and is believed to hold 26 billion barrels of crude oil reserves.

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