UPI Energy Watch

French Total and others are threatening to block North Sea development.

A consortium of foreign oil companies led by Total is threatening to block U.K. government plans to fully develop the North Sea, which contains more than a fifth of Britain's oil and gas reserves, the Guardian reported.

U.K. Prime Minister Gordon Brown met with senior executives from the consortium -- which includes U.S. Chevron, Italy's ENI and Denmark's Dong Energy -- and some of their rivals to try to broker a deal.

The two sides are represented on an industry task force set up by the government to try to develop the estimated 4 billion barrels of oil and gas equivalent in the offshore region.

Total owns the largest fields in the region and is resisting demands that it build a pipeline large enough to transport the gas in fields owned by the consortium's rivals.

Total said the request is not economically viable, and it will not consider the move without tax incentives, but its rivals worry that Total will deny them access to its pipeline.

The government argues Total could help bring the price of oil and gas down slightly by bringing more in through a larger pipeline.

Shell and Repsol have pulled out of Phase 13 of the South Pars gas field.

The news came ahead of the June decision deadline set by Tehran, and now concerns are growing over delays to the development of Iran's gas resources, the Globe and Mail reported.

Tehran has ambitious targets for its gas sector -- 475 billion cubic meters by 2020. That would make Iran the third-largest gas producer in the world, but without the development of new fields it's unlikely the country will meet that goal.

Development of these large reserves, most obviously the various phases of South Pars, is well behind schedule. In February the signing of the $16 billion deal with CNOOC was postponed. Gazprom, which is already involved in Phases 2 and 3 of South Pars with a 30 percent stake, is also negotiating for two or three blocks on South Pars, but few details are emerging. And in April the National Iranian Oil Co. announced a deadline of April 19 for Total and Shell to finalize their deals on South Pars developments or risk losing their contracts, although the oil minister had previously given mid-2008 as the deadline. The companies claim the delays have been caused by rising costs. However, last month Total's chief executive spoke of reluctance to invest large sums at "this period of international tension."

OPEC President Chakib Khelil blamed speculators again for the steep rise in oil prices.

As other world leaders claim that supply is the problem causing high oil prices, Khelil and the Organization of Petroleum Exporting Countries continue to insist that supply is not the problem.

"There is no problem of supply; the problem is much more linked to speculation," he said.

Khelil said oil prices are closely linked to the exchange rate of the dollar, which has fallen against other major currencies. He insisted again that increasing supply would not bring the cost down, according to Business Report.

He said on Saturday the cartel would not review production rates again until its meeting in Vienna, Austria, on Sept. 9.

Khelil linked the diesel fuel market to the rise in oil price saying that by encouraging production of ethanol, production of diesel has dropped.

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Closing oil prices, June 2, 3 p.m. London

Brent crude oil: $126.16

West Texas Intermediate crude oil: $125.59

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(e-mail: energy@upi.com)