Iran to scrap $1.2 bln deal with foreign firms

The Washington Post:

Iran will cancel the 960 million euro ($1.19 billion) "Olefins 11" contract signed last year with German industrial gases firm Linde and South Korea's Hyundai, Iran's Oil Ministry Web site reported on Monday. READ MORE

Under the Olefins 11 contract, the two companies were to build two ethane crackers in the Gulf port of Assaluyeh.

Conservative parliamentarians had argued that Iranian firms could carry out the project more cheaply.

"We are going to cancel the contract of Olefins 11 and we will do it by domestic contractors with a 260 million euro saving," Asghar Ebrahimi Asl, managing director of the National Iranian Petrochemical Company (NIPIC), was quoted by the Web site as saying.

"We will not pay any compensation to those companies for canceling the contract ... due to the initial work contract we have paid them 7.2 million euros already and their working hours have been less than that," he said.

He said the companies might challenge the decision.

Conglomerate Linde confirmed that Iran had canceled a petrochemicals contract.

"We suffer no financial damage," a spokesman said, adding that advance deliveries had been paid.

Linde's share of the deal was 404 million euros and Hyundai's share was 451 million euros, Ebrahimi Asl said.

Sharq newspaper quoted Ebrahimi Asl as saying domestic contractors would be helped by France's Technip.

"Technip has officially announced it is ready to accomplish the project 20 percent cheaper," Ebrahimi Asl was quoted as telling the newspaper.

Officials could not immediately be reached for comment.

Analysts have previously said a political storm over the Olefins 11 deal could trigger a flight of engineering companies from Iran, which is trying to boost petrochemical output.

Iran's oil minister said in Doha on Monday that the country was pleased with the inflow of foreign investment, despite opposition from the United States linked to its hostility to Tehran's nuclear ambitions.

"The truth is that investment in Iran is going well and we are not concerned," Kazem Vaziri said on the sidelines of the International Energy Forum in Doha.

While fears that the standoff over the nuclear program has aroused fears of an interruption of oil supplies from the world's fourth biggest oil exporter and sent the price of oil above $75 a barrel, Iran has sought to reassure consumers.

Vaziri said on Saturday that Iran's oil supplies would not be disrupted.