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Japan signs HUGE oil deal with Iran despite US concern

stir-fry

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http://www.channelnewsasia.com/stories/afp_world_business/view/71832/1/.html




Japan, Iran sign two-billion-dollar oil deal despite US concern






TOKYO : Japan said it had signed a two-billion-dollar deal with Iran to develop the massive Azadegan oilfield in order to assure stable oil supplies despite the US expressing "deep concern" over the deal.

A Japanese trade ministry official said the two sides signed an agreement early Thursday on the development of the Azedegan field in southwestern Iran after months of negotiations and repeated warnings from Washington that it was unhappy with the prospects of such an accord.

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Ever since the 1973 oil crisis, Japan, which imports nearly all of its oil needs, has developed its own diplomacy with key oil producers in the Middle East, often putting it at odds with the United States, especially over Iran, dubbed part of an 'axis of evil' by President George W. Bush.

The National Iranian Oil Company (NIOC), Inpex Corp. of Japan and a NIOC unit, Naftiran Intertrade Co. Ltd. (NICO), said in a joint statement they "signed the contract for the integrated appraisal and development operations of Azadegan field."

The Japanese government said it hoped the deal would lead to stable energy supplies and promote stronger ties between the two countries.

Inpex will hold 75 percent of the project and NICO 25 percent, with initial production set at 50,000 barrels per day (bpd) within 40 months, rising to 150,000 bpd after 52 months and 260,000 bpd in eight years.

The contract lasts 12-and-a-half years, with Inpex expected to recover its investment in six-and-a-half years.

Production is expected to start some time in 2007.

While the Japanese media said Japan went ahead with the deal after the United States had recently softened its stance on Iran, Washington appeared to be trying to deter the deal up to the last minute.

"We remain deeply concerned about deals such as this and disappointed that these things might go forward," US State Department spokesman Richard Boucher said Wednesday in response to reports the deal was imminent.

Boucher said Japan "is quite aware" that Washington had "fundamental concerns" about nuclear developments in Iran, its support for groups that oppose the Middle East peace process and its harboring of terrorists.

"All these things remain and have not changed," he said.

But in welcoming the deal Prime Minister Junichiro Koizumi insisted it did not mean Japan had turned a blind eye to the nuclear issue.

"Not only the United States, but Japan also has concerns over" Iran's nuclear proliferation, he told reporters.

Tetsuhiro Hosono, chief of the natural resources and fuel department at the trade ministry's Natural Resources and Energy Agency, told reporters he believed Washington had some "understanding over Japan's stance."

"We had thought America would not say 'That's great'," regarding the contract, he said.

"But we have told them Japan will develop natural resources to ensure stable supplies."

Takeyuki Takahashi, a senior research fellow at the Japan Institute of Middle Eastern Economics said Japan was right to pursue its own policy in the face of US pressure.

"If Japan had withdrawn from this project, it would have been criticized as America's 'yes man'," he said.

Inpex, an oil exploration company owned by the government's Japan National Oil Corp. and many private-sector companies, leads a consortium which includes trading house Tomen Corp. and another affiliate of the national oil corporation, Japan Petroleum Exploration Co. Ltd.

Hosono said it was "possible" that US and European major petroleum companies would eventually join the project.

Azadegan, with estimated reserves of 26 billion barrels, is the second largest oil field found since the 1980s after the huge oil reserves in the central Asian republic of Kazakhstan.

It was discovered in 1999 and Japan and Iran agreed in 2000 to start negotiations over its development.


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