TWO EUROPEAN MAJORS CROSS PATHS IN MEGAPROJECTS

Two European petroleum giants have crossed paths as they consolidate positions in a pair of privatization super-projects.

Royal Dutch/Shell Group pulled out of talks with National Iranian Oil Co. (NIOC) over development of two oil fields off Iran's Sirri Island, leaving France's Total as the main contender.

Meantime, Total pulled out of a refining privatization venture in the Czech Republic, leaving Shell and partners Agip SPA and Conoco Inc. to scramble to pick up the pieces.

IRANIAN PROJECT

NIOC recently said Shell, Total, and other companies, were negotiating to take over a development project Conoco originally secured and the U.S. government blocked (OGJ, Mar. 27, p. 25).

"There has been lots of talk about Shell being a frontrunner for Sirri A and Sirri E field developments," said a Shell International official, "but we have no current plans to pursue Sirri developments and have made no bid.

"Shell is always looking for opportunities around the world, and Iran is no exception. We are still in discussions with NIOC over South Pars field development. On North Pars projects we could not agree over rates of remuneration."

Paris daily Le Monde reported Total expects to wrap up an agreement with NIOC over Sirri A and E the next 2 weeks under the same terms as the original deal secured by Conoco.

The two fields are expected to produce 140,000 b/d of oil and about 384 MMcfd of gas. NIOC would assume operatorship once production reached a plateau, compensating Total in oil production, the newspaper reported.

Total did not comment on the report.

Total would be the first western company to return to E&P work in Iran since the Iranian revolution of 1978-79.

CZECH PRIVATIZATION

Shell, Agip, and Conoco acted to save a deal to buy a 49%, interest in Czech Republic's Kralupy and Litvinov refineries after Total pulled out of the deal at the last minute.

The four companies were given a deadline of June 30 by the Czech government to secure board approvals for an agreement setting out principles for the trade (OGJ, June 26, Newsletter).

A Shell official said his company, Agip, and Conoco won the backing of their boards, but Total decided to drop the project right on the deadline.

The three remaining partners persuaded Czech authorities to extend the principles agreement deadline to July 7.

They are now looking to Persuade their boards to sanction the larger capital contribution caused by increase of their individual stakes to 16.33% from 12.25%.

"The increase in costs is not seen as a barrier to proceeding with the agreement," said the Shell official. "The three companies have agreed to the revisions to the agreement, but they must go back to their boards to approve the increased interests."

The group hopes to secure 49% ownership of the refineries for $173 million, said the official, with state firm Unipetrol holding the remaining 51%. The deal also covers a 5 year, $500 million capital program to modernize the two refineries.

TOTAL'S STRATEGY

Total's pullout from the Czech venture is part of a strategy to reduce its position in Europe's refining sector in response to dismal margins and excess capacity there.

Total Pres. Thierry Desmarest recently said further consolidation of European refining capacity is needed if margins are to improve.

At the same time Total pulled out of the Czech venture, it sold its interest in Portugal's state owned refiner/marketer Petrogal to its Portuguese associates in Finpetro. The deal will reduce its exposure to lagging refining margins in western Europe by more than 20,000 b/d.

Total and Finpetro acquired 25% of Petrogal in 1992 as part of privatization efforts in Portugal. The acquired interest was managed through Petrocontrol, in which Finpetro held 52% of voting rights and Total 48%. Total will take a charge of about $16 million against first half earnings related to the sale.