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