Date: 02 Mar 2000
Time: 07:45:14
Remote Name: 156.29.145.175
Thu Mar 2 01:57:20 2000
Copyright 2000 EMAP Business International Ltd Middle East Economic Digest March 3, 2000
SECTION: Pg. 23
LENGTH: 1141 words
HEADLINE: FRENCH BANKS LOOK AT NEKA PIPELINE FINANCE
DATELINE: IRAN
BODY: The Geneva-based trading company Vitol and Hong Kong-based Federal Asia are negotiating with several French banks for a possible finance package for the proposed $360 million Neka-Tehran oil pipeline. The amount sought is believed to be $200 million-250 million. An agreement is expected by May, according to Vitol.
French bankers say preliminary talks started in January. Credit Agricole Indosuez and Credit Lyonnais are said to be among interested banks; Credit Agricole has been arranging large project finance lines recently (MEED 19:11:99), and Credit Lyonnais was in mid-1999 involved in an earlier abortive effort to arrange finance for the pipeline (MEED 20:8:99).
Half a dozen French banks have been approached, a source says.
Vitol and Federal Asia are acting on behalf of a Chinese consortium, led by China National Petroleum Company (CNPC) and Sinopec, which has a $360 million contract to build the 324-kilometre line from the Caspian Sea to the Tehran refinery (MEED 28:1:00; 1:10:99). The consortium will provide $130 million of the necessary finance itself.
The Neka-Tehran line is due to start carrying an initial 170,000 barrels a day of crude from Kazakhstan and Turkmenistan for use at the Tehran refinery in late 2002. Equivalent amounts of Iranian crude will be made available at Gulf terminals.
Balal, Doroud projects moving after delays
Two French-led consortia developing the offshore Doroud and Balal oil fields are evaluating several hundred million dollars worth of bids for platform construction and equipment supplies amid conflicting reports on the projects' schedule. Subcontracts will be awarded before mid-year and the fields will together start producing 260,000 barrels a day (b/d) on schedule, officials say.
Doroud is being developed under a $1,000 million contract awarded in early 1999 to a partnership of France's Elf Aquitaine and Agip of Italy (MEED 12:3:99). Balal is being rebuilt under a $300 million contract awarded soon afterwards to a partnership of Elf and Bow Valley Energy of Canada (MEED 14:4:99).
Doroud is scheduled to start producing 220,000 b/d from 2003; Balal is to produce 40,000 b/d starting in late 2001.
Decisions on $150 million worth of bids for platforms, rigs and various equipment for Balal were postponed in October, and hopeful subcontractors said they had been told by Elf at the turn of the year not to expect awards until at least June. Elf sources, however, said in February that subcontracts would be awarded well before mid-year.
After some delays over Doroud, small contracts, such as for 3-D seismic work and onshore drilling, were awarded at the turn of the year and tenders for platforms and equipment were issued in January with submission deadlines of February. Many of the Balal bidders are participating in the Doroud tenders (MEED 6:8:99).
"They (Elf) were in a big hurry and asked for budget prices - which means estimates can have a 20 per cent margin of error," says one of the bidders. Decisions on the winning bids are still awaited.
Outgoing Elf chairman and chief executive officer Pierre Vaillaud helped fuel speculation over serious delays when he told an early- February press conference that "contractual conditions" were becoming "tighter" in Iran and spoke of the need for a "balance" between the two sides. An Elf spokesman later speculated that Vaillaud may have been complaining about Iranian efforts to introduce last-minute changes over Balal and about the poor quality of bids by Iranian firms, which have to account for 30 per cent of any foreign contract.
However, Elf sources say Vaillaud appears to have been misunderstood. Vaillaud may have been referring to future negotiations being tougher with increased competition. One official close to the two projects said there had been delays, particularly with Balal, but these were routine and would not affect completion schedules.
Asked for a reaction to Vaillaud's apparent complaint, M Sahafi, a spokesman for the Iranian Offshore Oil Company (IOOC), said there were no unusual problems over Balal, nor was IOOC trying to change contract terms. The only complaint IOOC itself could make was that the pace of work by Elf "could be a bit faster".
Elf has, since signing the 1999 contracts, become part of the TotalFina group, but operates under its own name. Vaillaud was replaced by TotalFina chairman and chief executive officer Thierry Desmarest on 15 February. TotalFina itself has nearly $3,000 million in buy-back contracts and has been bidding for several big new projects tendered by the National Iranian Oil Company (NIOC).
US welcomes elections, hints at gestures
The US has hinted it might offer goodwill gestures to Tehran once the new majlis, dominated by reformists, starts its work in May. The State Department on 22 February welcomed the elections as a historic vote for greater openness and freedom (see page 24).
While repeating an offer of unconditional talks between the two countries, spokesman James Rubin said Washington was waiting for developments leading up to the first majlis session in May. "We will follow these developments closely and make any appropriate responses based on what we think will best promote the prospect of dealing with our concerns and dealing with Iran's potential role in the Middle East," he said.
US officials earlier told correspondents that the Clinton administration was considering several gestures, including a new conciliatory message by Clinton on the occasion of the Iranian new year on 21 March; granting media requests for a high-level US interview; and further easing a 1995 unilateral trade embargo, particularly on carpets and pistachios.
Mohammad Reza Khatami, the leading vote winner in Tehran and probable speaker of the new majlis, said on 22 February that Tehran is looking to the US to make a clear overture. Officials have in the past said the clearest gesture would be to release at least some Iranian assets frozen in 1979.
External accounts show big surpluses
The trade balance and current account are heading for healthy surpluses, according to data released by Bank Markazi (central bank). Total external debt was down to $11,688 million in September, Markazi's data for the first half of 1999/00 shows.
Oil exports earned $6,964 million in the first half of the year, which started on 21 March, with total exports providing a hard currency income of $8,666 million. Imports were limited to $6,201 million, helping to produce a trade surplus of $2,465 million.
The current account was in surplus by $2,116 million, compared with a deficit of a similar amount for the whole of the previous year.
Oil prices have continued to rise in the second half of the Iranian year, indicating that surpluses over the full year should be the biggest since 1996/97.