- The Washington Times - Wednesday, February 18, 2004

TEHRAN (Kyodo) — Japan and Iran signed a basic agreement last night on a major oil development project by a Japanese consortium in Azadegan, one of the largest oil fields in the world, sources at the Iranian Oil Ministry said.

A formal announcement of the agreement will be made tomorrow, they told the Kyodo news agency.

The agreement will grant the consortium rights to development of the oil field in southwestern Iran, close to the border with Iraq. The two sides will sign a formal contract after deciding details such as ratios of investment and the duration of the development, the sources said.

Actual production is expected to begin in 2006, with estimated maximum output of more than 400,000 barrels per day.

The United States expressed disappointment yesterday with the oil development agreement, concerned the deal will weaken U.S. efforts to increase international pressure on Tehran to abandon its suspected nuclear arms ambitions.

“Our policy has been, with respect to Iran, to oppose petroleum investment there,” State Department spokesman Richard Boucher told reporters. “We remain deeply concerned about deals such as this, and disappointed that these things might go forward.”

But a source familiar with U.S.-Japan relations said the United States currently has no plans to invoke a U.S. law that requires Washington to impose sanctions on international companies doing business with Iran and Libya.

The Azadegan oil field is believed to have crude oil reserves of 26 billion barrels. The agreement will give Japan the largest oil field it has developed independently.

The development will contribute largely to Japans energy security, since it lost the rights of negotiations in 2000 on the Khafji oil field in Saudi Arabia.

After obtaining preferential negotiation rights over the Azadegan oil field in November 2000, the government-backed Japanese consortium involving Tomen Corp., Inpex Corp. and Japan Petroleum Exploration Co. have negotiated with the Iranian government for over three years.

The talks had been stalled partly because of pressure from the United States, which has urged Japan to withdraw from the project because of concern about Irans suspected nuclear program.

Japan lost its preferential negotiation rights in June last year, and Iran apparently considered an international auction at one point.

But after Iran said recently it would accept inspections by the International Atomic Energy Agency and the U.S. softened its stance, Japan decided to push for the project.

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