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Iran to issue $4.2bn bond for gas projects

Tehran, June 25, 2012

Iran's Pars Oil and Gas Company plans to issue rial- and US dollar-denominated bonds worth 52 trillion rials ($4.2 billion) by March 2013 to raise funds for natural gas projects, oil ministry website Shana reported on Monday.

The development of Iran's South Pars gas field needs huge investment, the minister of petroleum, Rostam Qasemi, said in an appeal to the Iranian parliament for help, Shana reported.

Iran's state finances have come under unprecedented pressure from tightening Western financial sanctions and sharply falling oil prices, which have slashed revenues that are vital to fund the country's sprawling state companies.

POGC's financial manager Toraj Jahan Ara told Shana that there would be $1 billion of dollar-denominated bonds, with the rest rial-denominated. The bonds will be issued in three phases, Shana said; Bank Mellat would begin offering 5 trillion rials of rial-denominated bonds this week.

Previous Iranian bond issues have been limited to domestic investors and foreign investors are unlikely to be interested, even if high rates of return are offered, because of high inflation and risks attached to investing in the isolated Islamic Republic, a fixed income investor specialised in high risk assets said.

Iran sits on some of the world's largest gas reserves, nearly half of which lie in the world's largest gas field that is not associated with oil, which it shares with Qatar.

But Iranian efforts to develop its vast reserves for export have been frustrated by Western sanctions designed to starve Tehran of funds from oil or gas sales that could be used to fund its military.

U.S. and European bank sanctions effectively prevent foreign investors from funding Iranian oil and gas projects, while a ban on companies supplying technology to Iran's energy industry makes it even more difficult for the country to develop them.

The managing director of National Iranian Oil Co (NIOC), Ahmad Qalebani, has said a 'remarkable part' of NIOC's current annual budget of about $22 billion will be allocated to POGC, a subsidiary of NIOC.

Last year, $20 billion of credit was allocated to South Pars gas field projects, of which $14 billion was used, Shana said.-Reuters

Tags: Iran | bond | gas projects |

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