CONOCO DEFENDS DEAL TO DEVELOP TWO FIELDS IN IRAN

Conoco Inc. last week was defending its decision to allow a European affiliate to strike an oil and gas development deal with National Iranian Oil Co. (NIOC). The deal reportedly is worth about $1 billion. Several U.S. political leaders criticized the pact, charging it was a violation of a U.S. ban on dealings with Iran by U.S. entities. The U.S. severed formal diplomatic relations with Iran in 1979, after Iranian militants in Tehran stormed the U.S. embassy and held its staff hostage for more

March 13, 1995

2 min read

Conoco Inc. last week was defending its decision to allow a European affiliate to strike an oil and gas development deal with National Iranian Oil Co. (NIOC).

The deal reportedly is worth about $1 billion.

Several U.S. political leaders criticized the pact, charging it was a violation of a U.S. ban on dealings with Iran by U.S. entities. The U.S. severed formal diplomatic relations with Iran in 1979, after Iranian militants in Tehran stormed the U.S. embassy and held its staff hostage for more than 1 year.

Conoco defended its action, saying it was not required to seek U.S. government approval of the deal because it involved only a Dutch affiliate, Conoco Iran NY.

"In this, as in all of its business transactions, Conoco operates within the highest ethical standards and conducts its business subject to applicable U.S. and local laws throughout the world," Conoco said.

WHAT'S INVOLVED

Lost in the furor were details of the agreement, which calls for Conoco Iran to act as contractor in a project with NIOC to jointly develop Sirri A and Sirri E fields in the Persian Gulf. Information about the project was sketchy at best.

Sirri A field was discovered in 1972 and Sirri E in 1976, but neither field until now was marked for development.

In addition to procuring and installing major production equipment and related components, contractor Conoco Iran also is to lay a gas pipeline system from Sirri Island across the gulf to Dubai. In Dubai, the gas is destined for an enhanced recovery project and other uses. After installation is complete, the project is to be operated by NIOC's offshore division.

Conoco Iran expects to begin development by midyear, with production to start 2-3 years later. Combined production from the fields is expected to exceed 100,000 b/d of oil, with gas production to amount to as much as 120 MMcfd.

Talks with NIOC were under way for 3 years before NIOC awarded the project to Conoco. Major European companies also sought the contract, Conoco said.