(AFP, TEHRAN) – The Italian firm ENI is to sign a major contract Thursday giving it rights to gas extraction in the South Pars region of the Gulf in a deal believed to be the biggest between Iran and a foreign company since the Islamic revolution of 1979.
The deal, which puts Italy among Iran's leading partners in the energy sector, initially covers the development of stages (geographic zones) four and five of an eight-stage project, according to ENI's office in Tehran.
The first part of the contract, to be signed by ENI and the Iranian company Petro-Pars, will be worth $2 billion, the same source said.
"For the moment, it is Petro-Pars that will handle stages six, seven and eight of the giant gas fields of South Pars, but it could call upon foreign help," according to an Iranian energy source.
The total value of the project to develop the fields of South Pars, some 100 kilometres off the Iranian coast near Qatar, is estimated to be worth 4.3 billion dollars.
Iran has the second largest gas reserves in the world after Russia, estimated at 20 trillion cubic metres (700 trillion cubic feet).
The country also is the second biggest oil producer in the Organization of Petroleum Exporting Countries (OPEC), with an output of 3.7 million barrels a day, of which 2.4 million is exported.
It is looking to develop the technology of its energy industry, particularly with help from specialized foreign firms.
Relations with Italy are traditionally strong and improved considerably after President Mohammad Khatami's March 1999 visit to Italy, the first west European country he visited after his election in May 1997.
ENI signed a 540-million dollar contract in March 1999 in partnership with the French firm Elf for the exploration of the offshore oil deposits of Dorud in the north of the Gulf. The agreement should raise the site's production from 148,000 to 220,000 barrels a day within four years.
"Apart from its political nature, this new contract (with ENI) will enable Iran to revive its gas industry and particularly to prove yet again that the American oil sanctions are doomed to fail," a television commentator said Thursday.
Oil and gas contracts between Iran and western companies represent a challenge to the so-called D'Amato law from the US which in principle bans all oil investment in Iran above 20 million dollars.
The development of the South Pars fields, covering some 3,700 square kilometres (1,480 square miles), should greatly increase Iran's natural gas production, both for its domestic needs and for export.
The area is estimated to contain more than 10 trillion cubic meters (350 trillion cubic feet) of natural gas and should increase Iran's daily gas production by nearly 143 million cubic meters (five billion cubic feet).
The French firm Total, the first oil firm to invest in Iran since 1979, is currently developing two other zones in the South Pars region, stages two and three of the overall project, where it will also start extraction.
© 2000 Mena Report (www.menareport.com )