Russia’s OAO Tatneft signed an accord valued at $1 billion with Iran to develop the Zagheh oil field in the Persian Gulf nation, where many energy projects face delays due to intensified sanctions by Western countries.

A preliminary deal was signed in Tehran earlier Sunday between Tatneft, which is based in Russia’s Tatarstan region, and Iran’s Petroleum and Engineering Development Co., the Iranian Oil Ministry said on its news website Shana Sunday.

Russia, which has opposed the latest financial and energy sanctions on Iran, is helping restart the dormant Zagheh field and seeking more local ventures as western companies curb their investment in Iran, the second-largest oil producer in the Organization of Petroleum Exporting Countries after Saudi Arabia. Western countries have been increasing pressure on Iran over its controversial nuclear program.

“If Iran is keen, Tatarstan is ready to increase cooperation in the oil and gas sectors,” Tatneft Chairman and Tatarstan President Rustam Minnikhanov said in the Shana report. “The scope and diversity of Iran’s gas and petrochemical projects is unbelievable.”

The agreement will be finalized by the end of the Iranian calendar year on March 19, and Iran wants further collaboration with Tatarstan, Iranian Oil Minister Rostam Qasemi said, according to Shana.

“This firm is one of the world’s reputable companies when it comes to extraction of heavy crude oil, and so we wanted to use its experience and technology,” Qasemi was quoted as saying by the state-run Mehr news agency.

Tatneft’s biggest shareholder is the government of Tatarstan, an oil-rich and majority-Muslim autonomous region east of Moscow. The company’s shares are little changed in Moscow trading this year.

Minnikhanov also visited the South Pars gas field during his trip to Iran, according to Shana.

The Zagheh field, located in southwestern Iran, will start production within 24 months with a volume of about 7,000 barrels a day of heavy crude, and output will eventually rise to 55,000 barrels a day, Naji Seydouni, the managing director of Petroleum and Engineering Development Co., said in the Shana report.

The Zagheh field had been inactive for several years, the state-run Mehr news agency said in a report Saturday. A first oil well drilled several years ago was abandoned and Iran now plans to get further information by drilling a second well, Shana said. The Zagheh oil field is located 25 kilometers from the port city of Daylam, it added.

Iran is under four rounds of United Nations sanctions and separate punitive measures imposed by the United States and the European Union that aim to isolate the country and punish it for its nuclear activities. The U.S. and its allies accuse Iran of seeking to build nuclear weapons, an allegation that it rejects, maintaining that its program is solely civilian.

Russia has disapproved of sanctions on Iran, with President Dmitry Medvedev calling them “counterproductive” last week. Russia built Iran’s first nuclear power station, which started generating electricity in September.
 

(Bloomberg)