Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

2 Oil Firms Net $300M Deal in Iran

PARIS -- French oil major Elf Aquitaine and Canada's Bow Valley Energy have signed a contract to develop an Iranian offshore oil field, Elf said over the weekend, announcing its second deal with Iran in just over a month.

Its subsidiary Elf Petroleum Iran has an 85 percent interest and will be the operator for the Balal oil project, whose cost it estimated at $300 million.

The United States has frowned on European oil investments in Iran in the past, and France's Total nearly sparked a diplomatic row in 1997 when it announced a $2 billion gas deal with Iran.

But Washington held back from applying sanctions contained in U.S. legislation aimed at discouraging companies from doing business with Libya and Iran.

Both are accused by the U.S. government of sponsoring terrorism, but deny the charges.

In Total's case, the Clinton administration finally issued a waiver for the deal, citing the European Union's cooperation on curtailing Iran's capability to produce banned weapons.

A French foreign ministry spokesman said France does not recognize the legality of the extra-territorial reach of the U.S. legislation. "Elf is free to sign contracts in Iran if it wants. It's a commercial decision," the spokesman said.

Elf said the Balal field lies 100 kilometers south of Lavan Island in the gulf at a depth of 70 meters and has recoverable reserves estimated at 100 million barrels of good quality oil.

"First oil from Balal of around 40,000 barrels a day is planned for 2001," the company said in a statement.

It said the contract with the National Iranian Oil Co. was of a buy-back nature, which meant the consortium would be reimbursed and paid in the form of crude oil from the field.

On March 1, Elf and Agip, a subsidiary of Italy's ENI, signed a $1 billion deal to redevelop Iran's offshore Doroud oil field in a similar buy-back contract.