VZCZCXRO5404
PP RUEHAG RUEHBC RUEHDE RUEHDIR RUEHKUK RUEHROV
DE RUEHMD #0492 1261257
ZNY CCCCC ZZH
P 051257Z MAY 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 4704
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3410
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

C O N F I D E N T I A L MADRID 000492

SIPDIS

SIPDIS

STATE FOR EEB/ESC, ISN/CPI, EUR/WE, NEA
TREASURY FOR IA/OEE W.LINDQUIST

E.O. 12958: DECL: 05/05/2018
TAGS: EINV EPET IR SP
SUBJECT: REPSOL, SHELL REPORTEDLY SEEKING TO SELL IRAN GAS
CONCESSION

REF: A. MADRID 465

¶B. MADRID 418
¶C. 07 MADRID 270

Classified By: Charge d'Affaires Hugo Llorens for reason 1.4(d)

¶1. (U) Repsol and Shell will sell their joint 50% stake in
natural gas development in Iran's South Pars block 14,
according to reports in the Spanish business press. The two
firms are reported to be negotiating an agreement with the
GOI in which they would give up their concession in exchange
for an agreement that would allow them to obtain concessions
on other blocks that they could develop once the political
situation is more stable. One article said Repsol and Shell
were seeking concessions for blocks 23 and 24, which would be
developed in the next decade. The firms also are reported to
be working with the GOI to seek a partner -- possibly
Russia's Gazprom, India's IOC, or a Chinese firm -- to take
over the block 14 concession.

¶2. (U) The press reports cited USG pressure and also
technical/economic factors as having contributed to the
decision. The GOI reportedly wants to develop block 14 as
soon as possible, because it is near the border with Qatar
and the GOI fears that the Qataris will extract most of the
gas if Iranian development is delayed. Repsol and Shell
reportedly did not want to begin the project in June, because
the increase in construction costs of gas liquefication (LNG)
plants would mean that they would want to renegotiate their
existing contracts. One article said that the production
from block 14 would now be used for the Iranian domestic
market or for export by pipeline, rather than LNG export.

¶3. (C) Comment: Repsol CEO Antonio Brufau had told the
Ambassador April 28 that Repsol had decided to sell its
concession options and that its board would vote that week to
do so. Post has repeatedly emphasized to Repsol and to the
GOS the USG's concerns about this project (reftels), and the
decision is a sign that the pressure has paid off.
Nonetheless, with Repsol reported not willing to completely
cut ties to the GOI, we do not expect that this decision,
however welcome, will lead to a major change in GOS views on
hydrocarbons investment in Iran.
Llorens