Updated September 2, 2009

   The development of Iran's North Azadegan oil field can become the first foreign project of Russia's Gazprom Neft. In fact, the Russian company will execute only the service contract, but, under the certain terms, it can book the oil reserves and get the stake in the extraction of 5,5-6,5 million tons

of oil annually. Gazprom Neft is ready to develop three more oil fields in Iran under the analogical terms.

   As Gazprom Neft's chairman of the board Alexander Dyukov said, in August the company had sent the letter to the Iran authorities in what it had agreed to take part in the development of the North Azadegan oil field under the buyback terms. "There is a certain range of issues that should be clarified and examined. Now we are waiting for the invitation from the Iran party to come and to discuss these issues", as Mr.

Dyukov said. Gazprom Neft received the geological data of the Iran oil field and took an interest in the project, as he explained.

   According to the company's calculations, the North Azadegan's oil reserves total 150 million tons.

If the company agrees

the long-term contract to realize

the extracted oil, it can book the oil reserves. "In fact, it is a service contract.

We are bearing the already agreed losses that will return to us with a certain degree of profitability.

Also, we have to agree on the profitability and on the amount of oil that we will realize", the head of Gazprom Neft specified, and added that oil extracted at this deposit could attain 5,5-6,5 million tons per annum. However, he refused to name the exact stake the company expects to receive from the extraction and reserves. In June Mr. Dyukov supposed that Gazprom Neft could get 60% of the extraction.

The buyback contract is a type of the service contract, as the head of SRP Ekspertiza Mikhail Subbotin agrees.

The expert adds that investors act as a contractor foremost, and the government takes the key decisions.

   The Russian company would like to develop three more Iran's oil fields under the analogical terms – Shurum, Kukh-i-Rig, Dudru, and it is already holding talks with the Iran party. The western companies, vice versa, are leaving Iran – at the beginning of summer, Total left the country, and in spring Repsol and Shell withdrew from the plans of participating in the development of the 13th phase of South Pars gas field. The USA doesn't permit the companies within its jurisdiction to invest in Iran, and is against Iran's request to enrich uranium. Besides, the European Union has applied a range of sanctions against the companies cooperating with Iran.

However, the Russian companies are increasing their presence in Iran. In the mid-summer, Gazprom (owns Gazprom Neft) and National Iranian Oil Company (NIOC) signed the agreement about the cooperation under which the Iran party offered Russia "the full package of projects" on oil and gas extraction.

In addition to Gazprom, Lukoil that owns 25% in the project on

the geological exploration in the Anaran block is also operating in Iran.

Moreover, Tatneft wants to extract oil in this country as well.

   Gazprom Neft has the ambitious strategy of development, therefore it requires the foreign projects, and at the moment, the company is engaged in the extraction on Russia's territory, as VTB Bank's analyst Lev Snykov says.

He adds that from the viewpoint of the geological resources, Iran is a good market. "So, the positive fact is that Gazprom Neft is taking interest in such projects and the company will get them obviously due to its core stockholder", the expert marks. On the other hand, the political risks are very high in Iran, as Mr.

Snykov adds. At the same time, if the Russian companies don't sign contracts here, India and China will fight for these oil fields.