Tomen Corporation, one of the three partners that won exclusive negotiating rights on the field in June 2001, said in late February that it would not be part of the drilling team and its participation in the project was solely limited to business advice. Japan Exploration Company (Japex)is also widely reported in Tokyo to be preparing to pull out of the project for economic reasons. Negotiations on the deal were fiercely contested for eight months after the expiry of the two-year exclusive period.

Another Japanese state company, Japan Oil Gas & Metals National Company, which is soon to acquire Japan National Oil Company, is to take about half of the Japanese share of the project. Iran will hold a 25 per cent equity stake in the field development company through Jersey-registered state oil financier Naftiran Intertrade Company.

Now foreign companies are likely to be asked to participate. Early attention has focused on Total, which has worked closely with the Japanese consortium leader Inpex Corporationon projects in southeast Asia. Other potential partners include Norway's Statoil, Russia's Lukoiland China's Sinopec, all of whom expressed an interest in leading a development team before the Japanese consortium signed. Petrochinaand India's ONGC Videshhave also been touted as possible participants. The Royal Dutch/Shell Grouphas ruled itself out of the bidding, saying the project does not match its financial criteria for investment projects.

'We have not yet been contacted by the consortium but will be interested in what they have to say if they do talk to us,' says an IOC executive in Tehran.

The $2,000 million deal agreed in February will involve production of up to 260,000 barrels a day (b/d) when output peaks in 2012. Under the terms of the contract, the consortium will develop the southern part of the oil field, involving investment of around $2,000 million. The buyback deal will involve first production of 50,000 b/d in 2007, rising to 150,000 b/d in 2008 and 260,000 b/d in 2012.

Inpex said that profits will start to accrue within 13 years of the project start-up. Azadegan, which has total proven reserves of 26,000 million barrels, is the second largest oil field discovered since the 1980s.

The Azadegan deal should clear the path for a series of other oil awards. Discussions on the Bangestan project have been stalled as a result of the protracted Azadegan talks, and might now progress at a faster pace. The UK's BPand Total submitted proposals more than a year ago and negotiations have progressed little since then.