TOKYO Aug 09, 2006 (Dow Jones Commodities News via Comtex) Inpex Holdings Inc. (1605.TA) is in talks with its Iranian partner on when and how it can start development of the massive Azadegan oil field, Mutsuhisa Fujii, Inpex's director and chief financial officer said Wednesday.
At the same time, Inpex is in talks with Nippon Export and Investment Insurance, Japan's public insurance organization for international business, to cover the risks arising from possible sanctions against Iran, he added.
Japan is under pressure to side with the U.S. and isolate Iran as the U.N. Security Council adopted a resolution that gives Tehran until Aug. 31 to stop its uranium enrichment activities or face sanctions.
Because of that, government-backed Inpex may be forced to exit the oil project, which is expected to pump 150,000 barrels a day of crude by mid-2008, and 260,000 b/d by early 2012.
Azadegan oil field, located in southeastern Iran, near the border with Iraq, is estimated to contain 26 billion barrels of oil reserves. Inpex has a 75% stake in the $2 billion development project, while state-owned National Iranian Oil Co. (NIO.YY) holds the remaining 25% stake.
Fujii said if the Japanese government decides to participate in sanctions, it will have some negative impact on the Azadegan project.
"What kind of impact will depend on the scope of the sanctions. But we will look into measures to mitigate risks such as insurance," said Fujii.
He reiterated that Inpex has been unable to start the development because Iranian side hasn't finished clearing land mines in the field, a statement some analysts viewed as stalling.
"About 90% of the area is already cleared. But the remaining 10% is the most dangerous area filled with mines. The Iranian side has been slow because it does not have enough know-how to do that job," said Fujii.
Japan imports almost all of its energy needs, as it lacks natural resources.
Copyright (c) 2006 Dow Jones & Company, Inc.
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