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Oil & Gas Journal

Uchenna Izundu
International Editor

LONDON, May 15 -- Royal Dutch Shell PLC and Repsol-YPF SA have suspended plans to develop Phase 13 of South Pars gas field in Iran as relations between the US and Iran deteriorate and development costs rise.

US sanctions against Iran have made it increasingly difficult for foreign investors to develop the proposed $10 billion LNG export plant, but the companies have signalled an intention to look at other types of involvement in Iran at a later date. The US Congress is worried about Iran's nuclear program.

A Shell spokesperson said that it agreed to swap the development for "alternative suitable phases."

According to media reports, a Repsol source was quoted saying that the companies want to exchange their participation in block 13 for a role in block 20 or 21 due to rising development costs.

Other replacement candidates for the partners could be OAO and Asian companies. As Iran has huge gas potential holding the second largest proven natural gas reserves in the world, the majors have been reluctant to shun it completely despite pressure from Iran to commit to a development date. The country has published proven natural gas in-place of more than 27.57 trillion cu m.

Respol and Shell had planned to develop Persian LNG on Tombak Island in partnership with National Iranian Oil Co. to export 16 million tonnes/year of LNG to Europe, Asia, and the Far East. The plant was to use two 8-million tonne/year trains and start operations in 2007 and then 2011 (OGJ Online, June 1, 2007). Other products included 1.5 million tonnes/year of LPG, 4.5 million bbl/year of condensate, and 200,000 tonnes/year of sulfur, using 2.8 bcfd of natural gas.

Contact Uchenna Izundu at uchennai@pennwell.com.