Islamic Revolutionary Guard Firm Pulls Out of Gas Deal

July 19, 2010 - 1:32 AM
The engineering arm of Iran's powerful Revolutionary Guard, recently hit by U.N. sanctions, has partially withdrawn from developing the giant South Pars natural gas field.
IRGC logo

Logo of Iran's Islamic Revolutionary Guards Corps

Tehran (AP) – The engineering arm of Iran's powerful Revolutionary Guard, recently hit by U.N. sanctions, has partially withdrawn from developing the giant South Pars natural gas field.

In an announcement Friday, the Oil Ministry gave no reason for the pullout by Khatam al-Anbia and another Guard-linked firm from two of the 30 sections of the South Pars. But the move could reflect the strains on the domestic firms that have been tasked with the bulk of carrying out Iran's ambitious energy plans since many international companies have shunned working there over sanctions.

The elite Revolutionary Guard, which is Iran's strongest military force, boasts a powerful presence in the country's economy, with firms directly or indirectly linked to it involved in many forms of business. Khatam al-Anbia is one of Iran's largest enterprises, with projects in mining, telecommunications, dam building and the oil and gas sector.

In June, the United Nations ordered the freezing of Khatam al-Anbia's assets, adding it to its blacklisted Iranian companies in its latest round of sanctions in June over Iran's disputed nuclear program. The sanctions mean the firm will be unable to get foreign financing for its projects.

The Oil Ministry said on its website that Khatam al-Anbia and the other firm, Sepanir, had withdrawn from the deals they reached in 2006 to develop phases 15 and 16 of South Pars.

The project chief at the ministry, Abolghasem Nowbakhati, said they were replaced by three smaller firms – ISOICO, IOEC, SAFF, which are connected to the government, but not the Guard.

Khatam al-Anbia and its subsidiaries continue to develop other parts of the field. One subsidiary, Sadra, was awarded a deal just days after the U.N. sanctions were passed, when Iran signed contracts with a number of domestic firms on South Pars.

The giant offshore field in the Persian Gulf, which is shared by Iran and Qatar, holds an estimated 1,800 trillion cubic feet (50.97 trillion cubic meters) of natural gas. With its ambitious development projects at South Pars and elsewhere, Iran is hoping to nearly double its natural gas production to 39 billion cubic feet a day (1.1 billion cubic meters) by 2015.

Years of sanctions have deterred significant investment by international companies with deep pockets and technical expertise. That has forced Iran, increasingly, to rely on domestic firms for development projects – including South Pars – further fueling the economic power of the Revolutionary Guard.

But analysts, and even some within the Iranian government, have questioned whether Iranian firms – particularly those linked with the Guard – are qualified to work on such projects. Iranian officials have dismissed those concerns.

Samuel Ciszuk, Mideast energy analyst with the financial think tank IHS Global Insight, said the pullback may not necessarily be directly linked to the new sanctions on Khatam al-Anbia.

"Sanctions are hitting everything, so it wouldn't be easier for Iran to do it without Khatam al-Anbia," he said. "It might come down to the company itself feeling it was overstretched" by new phases it took on at Pars and from delays in payments from the cash-strapped Oil Ministry.

The deputy oil minister, Hossein Noqrekar-Shirazi, announced Thursday that Iran will issue 9 billion euros in bonds over the next two years to finance energy sector development, the semi-official Fars news agency reported.

The United Nations has aimed financial sanctions at the Guard and other entities in Iran it says are involved in developing the country's nuclear program because of Iran's refusal to halt uranium enrichment. The United States and its allies accuse Iran of trying to develop a nuclear weapon, a charge denied by Iran, which says its program is for peaceful purposes.