Petrobras to Invest $470M in Iran's Caspian Sea

Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, will sign a $470 million contract with Iran to develop Caspian Sea oil reserves, the Iranian Oil Ministry's information network, Shana, said on its Web site Tuesday.

Petrobras will drill three wells in blocks 06 and 29 in the Iranian section of the Caspian Sea, Seyed Mahmoud Mohades, director of exploration at the National Iranian Oil Company, is quoted as saying on Shana.

Petrobras press officials contacted by Dow Jones Newswires on Tuesday could not immediately confirm the information.

Petrobras in January had said it is in talks with Iran to become a service provider in Caspian Sea deep offshore drilling.

The state-run National Iranian Oil Co. had shown interest in a cooperation with Petrobras, which has a better expertise in deep and very deep offshore drilling.

Iran has the world's third-largest oil reserves and second-largest gas reserves. But the country's standoff with the U.S. and its allies over the Islamic republic's nuclear program and anti-western rhetoric from the country's President Mahmoud Ahmadinejad have intensified nervousness among foreign firms about investing there.

Petrobras will drill the Caspian Sea wells without having an equity stake in the fields while having a share in the sale proceedings in a kind of buyback contract, Mohades said.

Iranian legislation doesn't allow foreign firms to take an equity stake in Iranian energy projects, but the country allows them to act as service providers through so-called buyback contracts.

Buybacks allow oil firms to recoup their investments through oil and gas sales over a period of several years. Iran recently has revised the terms of buyback contracts to allow companies to be involved in a given energy project for up to 20 years.

Petrobras and Spanish energy firm Repsol-YPF (REP) also won a tender for exploration at the Tosan Block in the Persian Gulf. Petrobras and Repsol together will drill four exploratory wells in the Persian Gulf, Shana said.

Copyright (c) 2007 Dow Jones & Company, Inc.