UPDATE 4-Japan oil stake in Iran's Azadegan slashed to 10pct http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-10-06T114407Z_01_T33709_RTRIDST_0_ENERGY-JAPAN-INPEX-UPDATE-4.XML&rpc=66&type=qcna
Fri Oct 6, 2006
(Recasts)
By Ikuko Kao
TOKYO, Oct 6 (Reuters) - Japan's INPEX Holdings Inc. (1605.T: Quote, NEWS, Research) has lost its right to lead the $2-billion-plus development of Iran's Azadegan oilfield, the OPEC member's biggest find in three decades, the partly state-owned Japanese firm said on Friday.
INPEX's stake in the project has been cut to 10 percent from the 75 percent share agreed two and a half years ago, the company said at a briefing in Tokyo after it salvaged a sliver of the deal after a round of last-minute talks this week.
But operational responsibility for Azadegan, believed to hold more than enough crude to meet Japan's total import needs for three years, is being transferred to Iran, it added.
The loss is a blow to import-dependent Japan's efforts to bolster its energy security by acquiring overseas resources, but may be a political boost for the United States, which has strongly opposed investment in Iran and stepped up pressure this year as Tehran pursued nuclear work.
Iran's official IRNA news agency had reported on Thursday that INPEX's share would be reduced to just a tenth after Tehran refused to extend a deadline for starting drilling.
Talks on the project -- estimated at about $2 billion when agreed in February 2004 -- stalled over rising investment costs and doubts about the safety of the area, which needed to be cleared of the mines from the 1980-1988 Iran-Iraq War.
INPEX said only 90 percent of the area had been cleared of land mines, still not enough for it to begin drilling.
Resource-poor Japan has been in a tough spot after Iran's nuclear ambitions surfaced, stuck between the need to meet its energy requirements and its desire to keep in line with Washington, its closest security ally.
PRESSURE ON IRAN
Although Japanese officials have downplayed the political element of the Azadegan deal, INPEX's loss comes just as the West -- and particularly the U.S. -- ratchets up pressure on Iran to stop its nuclear programme. INPEX's major shareholder is the Japanese government.
The United States, backed by Britain, has suggested it is time to consider a sanctions resolution against Tehran, although Russia and China have typically resisted. Foreign ministers from six world powers convene in London on Friday to discuss Iran's continued pursuit of uranium enrichment. Azadegan was Iran's biggest oil find in 30 years when announced in 1999, with oil-in-place of 26 billion barrels and recoverable resources then estimated at about 6 billion barrels.
It was unclear how Iran would proceed with the project without a lead foreign investor, or what effect the news may have on European major Total's (TOTF.PA: Quote, Profile, Research) efforts to secure a small stake of about 15 percent in Azadegan.
A spokeswoman for Total declined immediate comment.
Iran has previously threatened to start developing the field on its own or to offer the project to Russian, Chinese and Iranian companies if INPEX did not start.
Losing Azadegan may endanger Japan's efforts to lift the share its companies produce overseas to the equivalent of 40 percent of the country's oil imports by 2030 from 15 percent.
But it is also a blow for Iran, the world's fourth-biggest producer, which is struggling to offset the 10 percent or more decline in its older oilfields. (Additional reporting by Tom Bergin in London)
© Reuters 2006. All Rights Reserved.