May 5, 2011 | Platts Oilgram News

Iran Revolutionary Guard Gets Gas Contract

Dubai-Khatam al-Anbiya, the construction arm of Iran’s powerful Revolutionary Guard, has been awarded a no-contest $1 billion gas development deal, the latest in contracts to domestic companies awarded outside a bidding process as Iran tries to speed up development of its massive natural gas reserves.

“The development project of the Halegan and Sefid Baghoun gas fields has been given to Khatam al-Anbiya Headquarters without putting out any tender,” Mehdi Fakour, managing director of the state-run Iranian Central Oil Fields Company, was quoted as saying April 30 by semi-official news agency Mehr.

Fakour put the value of the contract at around $970 million. Khatam al-Anbiya is already involved in Iranian oil, gas, petrochemical, mines and pipeline projects.

“Based on the agreement between the National Iranian Oil Company and Khatam al-Anbiya Headquarters, all the investment for the project should be made by this group [Khatam al-Anbiya],” he said.

The Halegan field with an estimated 351 billion cubic meters of gas in place, and Sefid Baghoun, with estimated in-place reserves of 170 Bcm, are in the southern province of Fars and are among recent gas discoveries. The two fields will produce 19,000 Mcf/d of gas.

Fakour said the move to hand over the project to Khatam al-Anbiya followed an order by Oil Minister Masoud Mirkazemi to skip the usual protocols for signing oil and gas contracts. “The oil minister has given some authorities to different companies so that those contractors with good financial capacities can take part in the projects without carrying out formalities,” he said.

Khatam al-Anbiya Headquarters has an overwhelming presence in Iran’s energy and infrastructure sectors with billions of dollars of projects in Iran, a position that was reinforced after foreign contractors pulled out as a result of international sanctions on Iran.

The US has placed Khatam al-Anbiya on its list of banned Iranian companies it says are suspected of involvement in nuclear proliferation efforts. The US State Department in 2007 identified Khatam al-Anbiya as one of two key Iranian entities that it said raised proliferation concerns and banned all dealings with them.

In an interview with the semi-official Fars news agency April 24, Revolutionary Guard Commander Mohammad Ali Jafari said the group’s involvement in economic activities “is not for profit.”

“The Guard’s duty is to protect the [1979 Islamic] revolution in all areas including from economic threats…these countries [foreign companies] were sent to our country to waste our time and the Guard entered this arena after foreign companies left the job,” Jafari said.

“Today, we only take those projects that domestic companies are not capable of carrying out or those which are in border or other sensitive areas where there are security issues,” he added.

Jafari said it was forbidden for the Guard to participate in “small and medium projects as well as the projects under Toman 100 billion ($90 million).”

Iran has the world’s second-largest gas reserves after Russia but its production is still far below its full capacity, largely because of the departure of foreign contractors discouraged from investing in Iran’s energy sector by a spate of international sanctions designed to force Tehran to halt its uranium enrichment program.

The government has said it intends to fast-track gas production in order to meet rising domestic demand and boost exports.