The deal, which was to be the first production-sharing agreement signed in Iran, is included in its investment plan for 2008-12, which has been frozen while the company assesses the fallout from the economic crisis.

Flavio Lemgruber Salvio, assistant to the board of directors at Petrobras, says the company has put a halt on international exploration, including deep-water drilling.

“We just have to wait and see on Iran,” Salvio tells MEED. “It is a good market for us but it is not cheap exploration.”

The contract was due to be signed within the next month, with work to start by the end of the year, following approval for the deal being given by Iran’s Petroleum Ministry in September (MEED 10:10:08). Drilling is expected to reach about 700 metres in depth.

MEED revealed in August that the state-run National Iranian Oil Company (NIOC) was considering production-sharing deals for the first time. It marks a radical change for Tehran, which has favoured buyback contracts for more than 20 years (MEED 22:8:08).

The Caspian Sea was heralded as a potential rival to the Gulf as a source of hydrocarbons energy in the early 1990s. However, a drop in oil prices in the late 1990s meant developments were postponed.

There are thought to be 21 billion barrels of oil equivalent in the south Caspian region.