Iran, Russia sign oil field deal, despite sanctions calls

Sympatico:  Russia's Tatneft and Iran have signed a $1 billion preliminary deal to develop the Zagheh oil field, state TV reported Sunday, deepening Moscow's business links with Iran despite U.S. calls for further sanctions over Iran's nuclear program.

The Zagheh oil field, located outside the town of Deilam in south Iran on the shores of the Persian Gulf, contains an estimated 3 billion barrels of heavy crude oil.

Iran's state TV quoted Oil Minister Rostam Qasemi Sunday as saying that the field will produce 7,000 barrels per day of heavy crude in the first phase of its development within two years.

"The field has the capacity to increase its crude oil production to 55,000 barrels a day in the second phase within 54 months," Qasemi was quoted as saying.

The TV report said a final contract will be signed within three months on a "buyback" basis, meaning the Russians will build the facilities but will not own them, and will receive their costs plus a pre-agreed profit in return.

Russia has rejected U.S. demands for new sanctions against Iran over its nuclear program, arguing for diplomatic solutions to the standoff over whether it is developing atomic weapons.

The U.S. charges that Iran is using its nuclear program to produce bombs, and a recent report by the International Atomic Energy Agency cited evidence to back that up. Iran rejected the report, insisting that its nuclear development project is for peaceful ends.

Iran is the second largest OPEC oil producer, with a production of about 4 million barrels of oil a day. The country's recoverable oil reserves are estimated at over 137 billion barrels, or 12 per cent of the world's overall reserves.

The country relies on oil exports for about 80 per cent of its public revenues. However, most of Iran's crude production is used domestically.

Iran also has the world's second largest natural gas reserves, estimated at 28 trillion cubic meters.