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Iran gives two week ultimatum to Shell, Repsol

TEHRAN — (AFP) – Iran has given a two week ultimatum to energy giants Shell and Repsol to decide on their investments in key gas projects or else they would be replaced by local firms, a top official said on Monday.

The deadline comes just two days after Iranian Oil Minister Masoud Mirkazemi threatened to kick out foreign firms for delaying the development of its massive South Pars gas fields and replace them with domestic ones.

Royal-Dutch Shell and Spain's Repsol have locked in negotiations with Iran since around 2002 to develop phases 13 and 14 of South Pars but they have delayed a decision on their investments amid growing Western pressure of new sanctions against Tehran.

"The oil ministry has issued an ultimatum to Shell and Repsol and they are expected to make a decision about phases 13 and 14 of South Pars in two weeks time," Reza Kasaizadeh, chief of National Iranian Gas Export Company told Mehr news agency.

"If they don't act promptly, we will hand over these two phases to capable Iranian firms."

Kasaizadeh said the two companies had been involved in developing the liquefied natural gas (LNG) projects for a "long time", but they have "not reached the FID (final investment decision) stage yet after all this time."

In January 2007, the US government reportedly told Shell and Repsol, who have interests in the United States, that their projects in Iran would probably infringe US law.

Global energy majors have come under increased pressure against doing business with Iran as Washington has stepped up efforts to impose new sanctions on the Islamic republic for pursuing its nuclear programme.

Iran has the world's second-largest reserves of natural gas. The South Pars field in the Gulf has around 500 trillion cubic feet (14 trillion cubic metres) of gas, which represents about eight percent of world reserves.

The development of the giant offshore field has been delayed amid a lack of investment in a country faced with severe gas needs of its own and due to difficulties in procuring the technology to develop these fields.

On Saturday, Mirkazemi threatened to replace foreign firms with domestic companies for developing South Pars.

"We have recently told some foreign firms which have delayed (development of) some phases (in South Pars) for several years, that we would not negotiate with them and domestic firms will be given these projects to implement," Mirkazemi said.

Iran, OPEC's second largest crude oil exporter, has planned a massive 200-billion-dollar investment in the energy sector over a five-year period to 2015.

But Mirkazemi acknowledged that the Islamic republic was facing shortage of funds for implementing these projects.

Iran's elite Revolutionary Guards Corps meanwhile have boasted they can take over the energy sector projects if Western firms pull out.

The Guards' presence in Iran's economy has risen under the presidency of hardliner Mahmoud Ahmadinejad, even as the United States and European Union target the body for "weapons proliferation" amid accusations it is involved in Tehran's nuclear programme.

The Guards Corps was set up soon after the 1979 Islamic revolution in Iran to defend the revolution from internal and external threats.