Iran Joins Race to Develop Caspian Sea Oil

JAKARTA (Reuters)–Iran’said Monday it was willing to team up with international firms and join the race to develop the huge oil and gas reserves of the landlocked Caspian Sea.

Tehran would offer a tender in the next Iranian year – which begins March 21 – to allow foreign oil companies to explore and develop fields in the Caspian’s waters–Oil Minister Bijan Zanganeh told Reuters.

"The second round of buy-backs will include the Caspian," said Zanganeh–who was appointed oil minister in August.

"Buy-backs" are a formula that Iran’s petroleum ministry has adopted as the framework for allowing foreign firms to develop its oil and gas reserves without clashing with the country’s constitution that bars foreign ownership or equity in oil.

The Caspian Sea has swiftly emerged as one of the world’s leading new oil zones–prompting powerful international firms to plough billions of dollars into territory divided between Azerbaijan–Kazakhstan–Russia and Turkmen’stan.

Azerbaijan in November marked first production from an $8 billion international consortium of firms that want to eventually produce 800,000 barrels per day (bpd) – more than 1 percent of current global oil demand.

Iran–whose massive onshore oilfields make it the world’s third largest crude exporter–has only tentatively started to develop its Caspian resources.

A lack of foreign exchange available to the state-owned National Iranian Oil Company (NIOC) and disagreement over how the countries surrounding the Caspian should proceed with development have hindered Iranian efforts.

The Caspian was divided between Iran and the Soviet Union in 1921 and again in 1940.

But the appearance of four new states in 1991 – Russia–Azerbaijan–Kazakhstan and Turkmen’stan – saw its spoils under question once more.

Iran and Russia have argued that the Sea is actually a lake and is the common property of all states surrounding it.

The other three say it should be divided into national sectors ands exploited independently.

Zanganeh said that foreign oil firms would also be allowed access to Iran’s onshore fields and given further access to acreage in the Gulf.

Foreign companies would be allowed to develop the fields under service contracts and buy-backs where investment is repaid with liftings of crude oil or condensates.

He ruled out "leasing" of Iranian reserves by international firms and production-sharing agreemen’s or equity all of which are barred by Iran’s constitution.

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