Mehr News Agency, Iran
July 12 2005

Iran ambitious to produce oil in Caspian Sea

TEHRAN, July 12 – The issue of oil exploration in the Caspian Sea, once
getting lots of news coverage, was marginalized for a long time, subsequent
to gas discovery in the oil wells of Meisam and Meqdad in Iran’s coast in
1990 and 1991.
In addition, the legal regime of the Caspian Sea and Iran’s border line are
yet to be determined, 1921 and 1940 historical `agreements’ are still
presented as the documents in this regard. Presently, Iran does not approve
the border line determined for it, because the division does not include in
the main share of oil resources held by the country.

However, despite problems, the agreement on oil exploration in the Caspian
Sea was made, pursuing the purpose of oil production by Iran in the next
couple of years.

Seismography in Caspian Sea

Due to a new contract made between Oil Exploration Company and Khazar Oil
Company, Pejvak ship will perform three dimensional seismographic operations
in the Caspian Sea. The two dimensional seismographic measurements have
already been taken by a consortium comprised of Shell Co. and Bowlazma.

Gas export to Armenia

Iran and Armenia have signed a contract according to which the former would
export gas to Armenia, and in return, it would import electricity. Based on
an agreement made between National Iranian Gas Company (NIGC) and TAVANIR
Co., the imported electricity would be connected to the national grid.’

The deputy further explained that the NIGC has the task of implementing the
construction operations and commissioning of gas pipelines for export
purposes, starting from Tabriz’s pressure station to Norduz village located
in Iran-Armenia border. In Armenia, SANIR Co., affiliated to Iran’s Energy
Ministry, is in charge of the pipeline construction to Karajan and
commissioning it.

In Iran, the construction of this gas export pipeline is delivered to the
domestic contractor on the EPC (engineering, procurement and construction)
basis, he said, adding that in Armenia, the pipeline construction has been
launched since February 2005. The Iranian contractor is presently equipping
the workshop; the required pipes have been purchased, and the construction
operations have been launched in four zones.

`The main contract has been signed by the NIGC and Armenia, and a trilateral
operational agreement for commissioning the pipeline is about to be
finalized among the NIGC, National Iranian Gas Export Company and Armenia
Republic. According to the agreement, the construction operation of the
pipeline in Iran would be completed by January 2007, and then the
commissioning would follow.’

According to a senior oil official, Salehiforuz, the part of the pipeline
passing via Iran is 113 km long and 30 inches in diameter. He added that 60
percent of the pipeline construction operation is carried out in the
mountainous and hard-to-pass regions.

The part of the pipeline passing via Armenia is 42 km long with a diameter
of 28 inches. It transfers gas from the border point with Iran to Karajan.
The received gas in Karajan is injected to internal gas distribution network
in Armenia, he stated.

The two countries have agreed on the figure of 200 million cu. m as the
volume of the gas export per annum, equal to 300,000 to 400,000 cu. m per
day.

Gas supply to Nakhichevan

The gas supply to Nakhichevan would be carried out on the swap basis with
Azerbaijan Republic. The NIGC takes the gas from Azerbaijan in the border
point of Astara and delivers it to Nakhichevan on Jolfa border. The
construction operation of this project is being implemented and would be
completed by October 2006.

Neka-Sari Pipeline

The 32-inch gas pipeline between Neka and Sari would soon be completed by
Iran Oil Engineering and Construction Company (IOEC), affiliated to National
Iranian Oil Products and Distribution Company (N.I.O.P.D.C). By implementing
this project, the capacity of transferring crude oil to Tehran would
increase to 370,000 barrels per day (bpd).

The amount of the crude oil swap was put at 65,000 bpd on average in the
last month with the renewal of the swap contracts by Nikoo Co.

The capacity of transfer pipeline of Baku-Tbilisi-Ceyhan at 50 million tons
per annum (one million bpd), explaining that this pipeline is 1,800 km long
and is like a reservoir with the capacity of 10 million barrels. In other
words, the pipeline itself is the first consumer and its operation has had
no impact on the amount of the oil swap via Iran.

Negotiations with Total

Negotiations have been made with the French Total Co. on transferring gas
within two stages. The first stage transfers crude oil to a maritime
terminal in Kazakhstan via a pipeline, and then, it is carried to Neka by
using the 63,000-ton ships. The second stage includes in the continuation of
the pipeline to the Persian Gulf, he said. A memorandum of understanding
(MOU) has been signed with Total Co. on this pipeline named KTI
(Kazakhstan-Turkmenistan-Iran).

Exploration contract in Caspian Sea

He said that a contract on oil exploration in the Caspian Sea has been
signed, and presently the required equipment for drilling two wells has been
purchased. For drilling the wells, North Drilling Company would enjoy
cooperation of a foreign partner possessing enough experience in this field,
since drilling wells in the deep waters is the first experience in the
country.

With regard to cooperation with the foreign companies in the Caspian Sea
project, an international company has made a proposal and an MOU would be
signed upon the agreement by the officials.

He also said that a proposal has been made on the presence of a third
company in the oilfields disagreed by Iran, Turkmenistan, and Azerbaijan.
However, the exploration operation would be carried out in these fields, if
an agreement is reached.

Alborz Platform

Alborz platform is made in order to launch drilling operations for the
exploration wells in the Caspian Sea as well as determination of the legal
regime of Caspian. It is the only alternative for developing the oilfields
in this sea. Khazar Oil Company is presently carrying out the construction
of the platform and drilling wells. In addition, the Foreign Ministry and
the Supreme National Security Council have emphasized to assist the Oil
Ministry on determination of the legal regime of the Caspian Sea.

The time of oil production in the Caspian Sea depends on the results of
drilling two exploration wells. If the results are successful, the project
developing the sea’s oilfields would be launched through drilling the
development wells.