Iran Replaces Gazprom With Domestic Cos in Azar Oil Field Project

LONDON (Dow Jones Newswires), Oct. 12, 2011

Iran said Wednesday it had awarded domestic companies a $1.9 billion contract to develop the Azar oil field, effectively abandoning plans to work with Gazprom's oil unit on the project.

The move comes as new oil minister Rostam Ghasemi, who previously headed Revolutionary Guards-owned contractor Khatam al-Anbiya, has warned that he would increasingly rely on local contractors instead of waiting for elusive foreign investors.

Huge oil and gas contracts Iran was hoping to clinch with non-Western concerns after European giants pulled out amid mounting sanctions have failed to materialize.

Iran's oil ministry website Shana said the state-owned National Iranian Oil Co. had signed a deal to develop West Iran's Azar field with a consortium of domestic companies, including Oil Industries Engineering and Construction Co.

Shana quoted Ghasemi as saying the ministry had decided to sign the contract with local contractors after a foreign company failed to finalize a deal within a 20-day deadline.

He didn't name the company but Gazprom's oil unit Gazprom Neft had been previously in talks to finalize an agreement to develop the field. And an official said over the weekend it would be replaced by local companies. Gazprom Neft didn't return a request for comment.

Ghasemi said that delays in negotiations with foreign companies proved they were not interested in taking part in Azar, a cross-border field shared with Iraq.

The news could be a setback for the Middle Eastern strategy of Gazprom Neft, which has agreed to develop the Iraqi side of Azar, called Badra.

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