Iran Oil Company Says Persian LNG Project Suspended

LONDON -(Dow Jones)- Iran is suspending some liquefied natural gas projects, including Persian LNG, and shifting focus on pipeline exports instead, the head of the country's state oil company was quoted as saying Saturday.

Iran's LNG schemes largely depend on key technologies owned by Western companies.

But Western companies have been deterred by mounting sanctions, with Repsol YPF (REP) recently ending talks to start Persian LNG. The suspension also comes as gas producers including Iran are increasingly concerned by a glut in international LNG markets after new U.S. natural gas discoveries.

In an interview with Iran's oil ministry website Shana published Saturday, Ahmed Ghalebani, managing director of the National Iranian Oil Co., said some LNG projects have been suspended.

He said those include the project tapping gas from phases 13 and 14 of the South Pars gas field, a gas export scheme called Persian LNG. Repsol and Royal Dutch Shell PLC (RDSA, RDSL.LN) were in talks to enter the integrated project as foreign investors.

While Shell's current plans are unclear, Repsol recently dropped the deal and Iran contracted the gas development to domestic companies. Ghalebani said the gas earmarked for the suspended LNG projects would be injected into Iran's national network.

He said the company was reconsidering LNG projects, which he said are costly and technologically complex, and focusing on cheaper pipelines with neighboring countries.

Iran earlier this year signed a $7.6 billion gas pipeline deal with Pakistan and last month agreed to build a new EUR1 billion route with a Turkish company.

Ghalebani said the suspension of some LNG projects does not mean putting an end to the development of LNG projects because they may be more profitable in the long term. The construction of at least one project, Iran LNG, is in advanced stages, and an official at the project said the project was continuing. But other LNG projects such as Persian LNG and Pars LNG--for which Total SA (TOT) has been in talks--have been on the drawing board for years. Spokespeople for Shell and Total declined to comment. An official at Pars Oil and Gas Co., which oversees the South Pars development, said that "LNG projects are not in NIOC priorities."

"For the next five to seven, NIOC prefers to invest on gas export by pipelines to foreign countries," he added.