Iran energy sector sells bonds worth €100m

Iran's state energy sector sold bonds worth some €100 million (Dh498m) yesterday morning, the first day of a planned €1 billion bond offering to help finance key natural gas projects, the Oil Ministry website Shana reported.

Shana, quoting an official of lead manager Bank Mellat, said the buyers of the euro-denominated bonds were mainly from Gulf states, but also from Asian countries, including Japan.

Iran has said it plans to offer the bonds, designed to fund development of its South Pars gas field in the Gulf, in four installments of €250m each over a 120-day period at Iranian banks abroad.

The issue represents a rare bid by the Islamic Republic, which is under UN and US sanctions over its disputed nuclear work, to raise capital in this way.

"Bonds for about €100m were sold this morning and it is expected that the whole amount of €250m will be sold by the end of Wednesday," Bank Mellat official Saeed Ghaffari was quoted as saying.

"The clients were mainly from the Gulf states as well as some Asian countries, like Japan and Malaysia," he said. Because of firm demand, Ghaffari said the rest of the offering, €750m, may be issued in one go early in the next Iranian year, which starts on March 21.

Analysts say Iran needs funds to help modernise and expand its oil and gas sector, but particularly Western companies are increasingly wary of investing in the major oil producer due to the nuclear dispute.

"Some foreign banks were also willing to buy the bonds but because of sanction problems they were not able to buy," Ghaffari said.

The bonds, guaranteed by the National Iranian Oil Company and issued by its subsidiary Pars Oil and Gas Company, will have a maturity of three years and an interest rate of eight percent, Shana said on Sunday. The money raised is earmarked for the development of phases 15-18 of Iran's South Pars natural gas field.

South Pars contains about half of the estimated 28 trillion cubic metres of the country's gas reserves. Iran has the second biggest gas reserves in the world after Russia, but sanctions and other factors have slowed its development as an exporter.

Iran has struggled for years to find the cash and the technology to develop its energy sector as sanctions and political pressure have kept foreign firms away. It has increasingly shifted to Asian countries to develop its oil and gas fields.

State-owned Asian firms are less susceptible to Western pressure to stay away from the Iranian market and are eager for energy supplies from the Islamic state to feed future growth.

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