BAHRAIN SIGNS FRAMEWORK AGREEMENT WITH IRAN ON

C O N F I D E N T I A L MANAMA 000715

SIPDIS

E.O. 12958: DECL: 10/16/2018
TAGS: EPET PREL IR BA
SUBJECT: BAHRAIN SIGNS FRAMEWORK AGREEMENT WITH IRAN ON
NATURAL GAS

REF: A. 07 MANAMA 1070

B. MANAMA 702

Classified By: CDA Christopher Henzel for reasons 1.4 (b) and (d).


1. (C) Summary: On October 15, Bahrain signed a framework
agreement with Iran to continue talks toward an agreement on
importing natural gas from the South Pars field. The
agreement prepares the way for negotiations to begin next
year on pricing and delivery. Even if pricing negotiations
move quickly, gas imports would not begin earlier than 2013.
End Summary.


2. (C) On October 15, Bahrain's Minister of Oil and Gas
Affairs, Dr. Abdul Hussain bin Ali Mirza, met in Manama with
his Iranian counterpart Ghulam Husein Nowzari, and signed a
non-committal framework agreement establishing the groundwork
for further negotiations to purchase gas from Iran. Contrary
to some published reports, the agreement did not/not
establish a joint venture between Bahrain National Gas
Company (BANAGAS) and Iran. Mirza told EconOff that the
agreement, in principle, provides for the importation of up
to one billion standard cubic feet per day (SCFD) of gas, not
to include "rich" or "wet" gas. The gas would come from the
South Pars field, but no discussions regarding the
construction of a pipeline have taken place yet. (Note: The
South Pars field is the Iranian portion of the largest known
gas condensate field in the world. The Qatari portion of the
field is called the North Dome field.)


3. (C) Nowzari told Mirza that Iranian President Ahmadinejad
had instructed him to treat Bahrain as a "special case" and
be granted preference over Oman and other potential GCC
purchasers of gas. Mirza was skeptical that Ahmadinejad had
actually said this. He said the next round of negotiations,
which will include discussions on gas pricing and the
possible construction of a pipeline, will take place before
the end of the year in Bahrain. If the negotiations go
quickly and smoothly, Mirza said, gas would not start pumping
earlier than 2013 since pipeline construction would take a
minimum of four years. But, he continued, price negotiations
will likely last for at least a year or two. (Note: There
were five rounds of negotiations following the November 2007
Iran-Bahrain gas MOU before closure on yesterday's framework
agreement. End note.)


4. (SBU) Local press also quoted "parliamentary sources" as
saying that Iranian Shura Council Chairman Ali Larjani would
visit Bahrain October 21-22 to meet with GOB officials and
members of parliament. We heard similar reports from a
contact at the Information Ministry.


5. (C) Comment: This framework agreement occurred in the
timeframe laid out in the November 2007 MOU. The
announcement that the gas would come from Iran's South Pars
field makes economic sense, since it is the largest Iranian
field and closest to Bahrain. However, in Bahraini
calculations it may also serve to put pressure on Qatar to
reconsider its decision to decline a gas deal with Bahrain,
since the gas would actually be coming from the same South
Pars/North Dome field.

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Visit Embassy Manama's Classified Website:
http://www.state.sgov.gov/p/nea/manama/
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HENZEL