Tomen Decides Not to Invest in Azadegan Project

Tomen Corp, which was part of a consortium that negotiated a deal to develop Iran's huge Azadegan oil field, said on it had decided not to invest in the $2 billion project.

Inpex signed a deal in Tehran on February 18 to develop the field, which has estimated reserves of 26 billion barrels of crude.

Despite of the size of the reserves, Shell also said it has no plans to join the Azadegan project.

Tomen, along with Japan Petroleum Exploration Co, took part in the long-running negotiations with Tehran but until Thursday it had not said whether it would actually invest in the field, one of the biggest discovered since the 1980s.

"We do not plan to make any of the $2 billion investment," a Tomen spokesman said. Tomen had decided against investing in the project at the beginning of the talks, though it helped INPEX by using its Iranian business network, he said.

"It is unthinkable for us to invest in the project," the spokesman said. "There's no way for our company to squeeze out billions of yen for it."

Tomen, burdened by large debts, is undergoing a restructuring with the support of Toyota Motor Corp. In the business year ended in March 2003, Tomen booked 922 billion yen of total liabilities, reporting a full year net loss of 67 billion yen ($615 million).

"It's true that we have helped INPEX with our expertise in Iranian business," the spokesman said. "But basically the talks have been government to government, so we have never been in the front line of the negotiations," he said. "We do not drill oil wells."

Many in the Japanese oil industry are skeptical about the feasibility of developing Azadegan, noting the many land mines in the area and the field's fractured structure. Oil has been found in small pockets in the region, which lies near Iran's border with Iraq, and many wells will have to be drilled. This will make development expensive.

Inpex, which holds 75 percent of the project, has said it is looking for partners to help bring the field into production. The rest is owned by Iran.

Last week, an Inpex official said Tomen might later take part of its holding in the project. Tomen, while not taking part in the development of the field, would be interested in winning business associated with its development, the spokesman said. "As an independent trading house, we want to explore opportunities in related business," he said.