Bloomberg: Iran may remove Japan’s Inpex Corp. from the $2.5 billion Azadegan oil project within the next three months because of a lack of progress at the field, the nation’s largest discovery in more than three decades. June 2 (Bloomberg) — Iran may remove Japan’s Inpex Corp. from the $2.5 billion Azadegan oil project within the next three months because of a lack of progress at the field, the nation’s largest discovery in more than three decades.
“If they are unable to continue, we will start doing so ourselves,” Kazem Vaziri-Hamaneh, the oil minister from Iran, OPEC’s second-largest producer, said in an interview yesterday. “Within two to three months, the situation will be clearer.”
Losing Azadegan may stunt ambitions by Japan’s largest oil explorer to expand in the Middle East. The company’s stock fell for a third day, bringing its decline in the past 7 1/2 weeks to 27 percent as some investors show their concern at the potential blow to future production, said analyst Hidetoshi Shioda.
“Local investors are digesting reports of Inpex’s possible withdrawal from the project as a bearish factor to accelerate selling” of the stock, said Shioda, a senior energy analyst at Mizuho Securities Co. in Tokyo. “Azadegan could be a significant driver paving the way for Inpex to tap into other projects in the Middle East,” he said.
Shares of Inpex fell as much as 5.2 percent to 920,000 yen in Tokyo, and traded at 935,000 yen at 2.22 p.m. The benchmark Nikkei 225 Stock Average gained 1 percent.
Nuclear Tensions
Japan’s government has been under pressure from the U.S. to give up the Azadegan project, because Iran has refused to end its uranium enrichment program, prompting the U.S. and Europe to seek sanctions by the United Nations Security Council. Inpex has been waiting for National Iranian Oil Co. to get rid of mines planted at the field during the Iran-Iraq war between 1980 and 1988.
“It is a precondition of the contract that they complete mine removal in all areas of the field,” Inpex Chairman Kunihiko Matsuo said in an interview earlier yesterday. “We should be able to start the project as soon as the landmine clearance is done.”
Inpex won the rights to develop Azadegan in February 2004. The production target for the field is 260,000 barrels of oil a day by 2012. Inpex produced 336,000 barrels a day of oil equivalent in the year ended March 31, 2006. Oil output was 204,700 barrels a day and gas production 787.8 million cubic feet a day, according to a May 16 statement from the company.
Iran may transfer Tokyo-based Inpex’s 75 percent stake in the Azadegan oilfield to a domestic contractor if the project doesn’t move forward, the Tehran Times said May 14, citing an official with state-run National Iranian Oil it didn’t identify.
September Deadline
“We don’t have any plan to give this specific project to others,” Vaziri-Hamaneh said during the Organization of Petroleum Exporting Countries meeting in Caracas.
Reports citing Mehdi Bazaargan, managing director of Iran’s Petroleum Engineering & Development Co., have said the contract to develop the Azadegan project will lapse in September unless Inpex starts work.
The deadline for starting work on the field is Sept. 22, Bazaargan was cited as saying by the Islamic Republic News Agency, according to a Kyodo News report on May 30. He said the agreement between Inpex, National Iranian Oil and its subsidiary Petroleum Engineering rules out the option of extending the implementation period beyond 2 1/2 years.
“We haven’t received such a warning from Iran,” Matsuo said yesterday. “The Iranian side would like to start the project as soon as possible, and so would we.”
Profit Forecast
Mine removal isn’t the main obstacle to delay and development work can begin in the main area, Bazaargan was cited as saying by Kyodo on May 25.
Japan, which has urged Iran to halt its uranium enrichment program, is cutting oil imports from Iran, its third-largest supplier, out of concern the nuclear standoff increases the risk of supply disruptions.
“The project is nothing to do with their importation of crude oil,” Vaziri-Hamaneh said. Japan is “still our main buyer of crude oil.”
Inpex, formed in April by Inpex Corp.’s takeover of Teikoku Oil Co., increased its full-year profit forecast 7.8 percent on May 16 because of higher crude oil prices. Inpex expects net income of 97 billion yen ($880 million) for the year ending March 31, 2007, it said in a statement.
Inpex Corp. had a 23 percent profit decline to 16.7 billion yen in the three months ended March 31, from 21.5 billion yen a year earlier, according to derived figures. Teikoku Oil’s first- quarter profit rose 20 percent to 6.5 billion yen.
Oil rose in New York for the first time in three days on concern Iran may reject incentives for the country to curtail its nuclear program. Oil for July delivery rose as much as 43 cents, or 0.6 percent, to $70.77 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $70.74 a barrel at 1:07 p.m. in Singapore. Prices today are 32 percent higher than a year ago.
