UK involvement in the revival of the oil industry in Iran increased yesterday as Premier Oil announced a joint venture to develop an offshore field, and Monument Oil & Gas indicated it was keen to join a pipeline project in the country.
Premier is teaming up with Bow Valley Energy of Canada to develop the offshore Balal field. The venture will be the biggest move yet by a UK oil group back into Iran.
The Islamic Republic is keen to attract western capital again to help its ageing oil industry back on its feet. It has invited foreign participation in over 40 projects, but only on the basis that participants are paid in kind.
However Iran is still a pariah as far as the US is concerned, and an American law threatens sanctions against firms that invest more than $20m a year in the Iranian oil industry. Total had to be granted an exemption from the act, but Premier said the legislation did not directly affect British companies. However, the group does not expect its investment to exceed the limit.
Monument is keen to get a stake in a $400m pipeline which is planned to run from the Caspian Sea to Tehran as it could be used to transport the oil it produces in the region. Iran has invited bids for the construction of the 370km pipeline. Monument chief executive Tim Eggar, the former Tory Energy Minister, declared: ''We are in discussion with other companies about it''.
The group wants to reduce the operating and transportation costs of its Burun field in Turkmenistan, where oil production has recently begun, but said the pipeline project was in the early stages.
Relatively high costs in Monument's UK interests and the lower oil price hit its latest results for the six months to June, though the group managed to make net profits of #6.8m against #7.9m in the period, helped by the yield on the recent #95m rights issue.
The shares firmed three-quarters-of-a-penny to 43.75p.
Monument was shielded from the worst effects of the oil price plunge by the large gas content of its portfolio, amounting to 45% of production and 60% of turnover. Total production of oil and gas was 4% down at 21,400 barrels of oil equivalent a day.
Eggar pointed out that net income was well above analysts' forecasts, despite the oil price.
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