Iran's Rich Oil Fields Attract Foreign Investors

NOAH ADAMS, host:

From NPR News, it's ALL THINGS CONSIDERED. I'm Noah Adams.

At $100 a barrel, oil means a flood of petrodollars for many countries in the Mideast - the windfall is especially timely for Iran. The U.N. Security Council and the U.S. have both imposed economic sanctions on the Tehran government. But Iran has large reserves of oil and even larger fields of natural gas - much of it untapped - and it's finding that lots of countries are eager to help exploit those resources.

NPR's Mike Shuster has a report now from Tehran.

MIKE SHUSTER: For years, the United States has used its sanctions laws to put foreign energy companies on notice that if they invest in Iran's oil and gas industry, they might face retaliation from the U.S. Until now, this has been largely effective in preventing Iran from expanding and modernizing its energy industry, and especially in opening up new oil and gas fields which are believed to be enormous.

Now, with oil commanding such a lofty price and demand for natural gas skyrocketing from East Asia to Western Europe, Iran is not lacking for partners says Hamid Zaheri, a businessman and former official in Iran's Oil Ministry.

Mr. HAMID ZAHERI (Former Official, Iran's Oil Ministry; Businessman): Look, the world needs Iranian oil and gas. It's the energy hub of the world. It's between the Caspian Sea and Persian Gulf, and these two regions, they have 71 percent of total world oil and gas. Particularly, Iran is there, so it's very difficult to ignore.

SHUSTER: Among the nations that have found they can't ignore Iran are China and India and now Europe. Russia, too, is paying attention, not as a customer but as a competitor. The deals under discussion with China are very large. Several years ago, one Chinese oil company signed a deal worth $70 billion over 30 years to invest in Iran and ensure a steady supply of natural gas for China. More recently, there have been additional deals under discussion worth nearly $20 billion in further Chinese investment especially in Iran's North Pars gas field.

These deals have not been affected by China's decision earlier this month to vote in favor of a third U.N. Security Council sanctions resolution designed to pressure Iran to suspend its controversial uranium enrichment project. Hojatollah Ghanimifard is executive director of Iran's Oil Ministry.

Dr. HOJATOLLAH GHANIMIFARD (Executive Director, Iran's Oil Ministry): These discussions goes to many years ago and finally we could conclude some contract with them. And I think it's not going to be the end of it because we are discussing with them for some new project as well.

SHUSTER: Iran has not only been rewarded with its below-ground assets, it's been blessed by geography as well. It is indeed the hub of the energy world and it has been working aggressively to take advantage of that.

For several years, Iran, Pakistan and India had been discussing the construction of a pipeline that would provide a steady supply of Iranian natural gas to energy-starved India. The pipeline would be 16,000 miles long, cost $7 billion, and would cross Pakistan, thus providing Pakistan with a steady revenue stream from transit fees. The Bush administration does not want India to participate in this pipeline project, but it does not look like American pressure will scotch the deal. Ghanimifard makes the argument that the benefits of such a deal go far beyond South Asia.

Dr. GHANIMIFARD: We hope that this export of the gas not only is going to be helping the Pakistanis and Indians, even it's going to be helping Americans because finally they would have more access to other sources.

SHUSTER: Meaning, the more energy supply in the global market, the more likely prices will remain under control. The Iranians also have their eye on the European market for natural gas and this may be Iran's boldest move. Right now, Russia supplies more than a quarter of Europe's natural gas and that is expected to grow to a third in two years.

But this relationship makes Europeans uneasy given Moscow's inclination at times to shut off the gas valves when the Kremlin has been displeased by political developments. Enter the Nabucco pipeline. This is a project to build a 2,000-mile pipeline from the Turkish-Iranian border west, across Turkey, through Bulgaria, Romania and Hungary, ending in Austria, cost: $5 billion. It makes perfect sense, says Hamid Zaheri.

Mr. ZAHERI: You know, Iran has got the second largest gas reserve in the world after Russia. The only other country which can provide Europe, especially Europe, with additional gas demand is Iran.

SHUSTER: Although, Russia and Iran cooperate on many international issues, Moscow is not happy about Iran's attempt to muscle in on the European gas market. That makes no difference to Iran, says Hojatollah Ghanimifard.

Dr. GHANIMIFARD: A very good market in Europe exist and the incremental amount of the gas that they need in the years to come, a part of it - a very good part of it, can be supplied by Iranian gas.

SHUSTER: Anything that ties Europe and Asia closer to Iran is a good deal from the Iranian point of view because it is bound to limit the pressure the world will exert on Iran's nuclear program, and that is making it harder for the U.S. to bend Iran to its will.

Mike Shuster, NPR News, Tehran.

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