The deal received final approval from the Oil Ministry on 12 February and comes almost a year after Sheer Energy signed an initial service agreement with NIOC on 13 March 2001.

'For a company of our size, this is a good deal,' says a Sheer Energy official. 'We will travel to Iran in early March for the signing ceremony, which will be held sometime between 4 and 12 March.'

Sheer Energy has a 49 per cent stake in the project, with the local Naftgaran Engineering Services Companyholding the remainder. The contract is Sheer Energy's first deal outside Canada.

The venture will carry out a detailed reservoir simulation study, the recompletion of four to six wells, the drilling of two new vertical wells and eight horizontal wells, and the construction of processing and water reinjection facilities. Production at the field, which is located in Khuzestan province, 90 kilometres north of Ahwaz, is to increase to 25,000 barrels a day (b/d) of oil from NIOC's current production level of about 5,000 b/d. Project works are set to begin once the final agreement has been signed.

Sheer Energy says that it is not breaking the US-imposed Iran Libya Sanctions Act (ILSA) since the company's share of investment over four years will remain below the critical $20 million threshold.

Masjid-e Soleiman is Iran's oldest oil field, with the first well drilled back in 1908. It is 30 kilometres long and seven kilometres wide, and is one of several fields in the region producing from the Asmari formation. The field has an estimated 6,500 million barrels of oil in place.