Guards-linked firm signs deal on Iran gas projects

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Fri May 28, 2010 2:04pm BST

* Sign that Revolutionary Guards' influence may be growing

* Sanctions deterring Western energy firms

TEHRAN May 28 (Reuters) - An engineering company linked to Iran's Revolutionary Guards has signed a tentative agreement to develop three sections of the country's huge South Pars offshore natural gas field, a senior energy official said on Friday.

The plan to award vital energy projects to Khatam al-Anbia highlights what analysts say is the Guards' growing economic role in the Islamic Republic, at a time when a U.S.-led sanctions push is deterring Western firms.

"A memorandum of understanding has been signed with Khatam al-Anbia for the development of these three phases," the semi- official Mehr News Agency quoted Ali Vakili, managing director of the state Pars Oil and Gas Company, as saying.

He was referring to phases 22-24 of South Pars, the world's largest reservoir of gas. In addition, the field's phases 13 and 14 were expected to be developed by an Iranian consortium also including Khatam al-Anbia, Mehr said.

Iran sits on the world's second-largest gas reserves after Russia, but sanctions hindering access to foreign capital and know-how have slowed its development as a major exporter.

Many foreign countries are investing in the field, but U.S. and U.N. punitive measures, imposed because of suspicions that Iran is developing nuclear weapons, have caused Western companies to treat Iran with caution. Iran says its nuclear programme is aimed at power generation.

China's National Petroleum Corporation has clinched a $4.7 billion deal to develop part of South Pars, supplanting Total (TOTF.PA) as lead partner in the project after the French firm delayed its investment decision under political pressure.

The Guards, with their own navy, air force and command structure separate from the regular armed forces, are seen as fiercely loyal to the Islamic Republic and its values.

SHELL, REPSOL

Vakili said South Pars' daily gas output stood at 200 million cubic metres and that this was expected to increase to 275 million cubic metres by the end of September.

"With the completion of all remaining phases the figure will reach 800 million cubic metres per day," he said.

The Guards' influence appears to have grown since hardline President Mahmoud Ahmadinejad, himself a former guardsman, came to power in 2005. The force helped to quell huge opposition protests that erupted after his disputed re-election in 2009.

Last year, a Rand Corporation report said Khatam al-Anbia had been awarded more than 750 contracts in construction, infrastructure and energy projects.

Qatar, which holds the southern section of South Pars, has developed its side of the field to become the world's largest exporter of LNG, gas cooled to liquid under pressure for transportation in special tankers.

Earlier this month, Oil Minister Massoud Mirkazemi said Iran planned to replace foreign companies that have "dragged their feet for years" with domestic firms in developing South Pars.

Mirkazemi did not name any firms, but another official said earlier this month that Iran had put Royal Dutch Shell (RDSa.L) and Repsol (REP.MC) on two week's notice to decide on their involvement in the field. [ID:nKAL042548]

Iran says both Anglo-Dutch Shell and Spain's Repsol have procastinated on finalising their involvement. (Writing by Fredrik Dahl; editing by Anthony Barker)

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