Iran to issue 1 bln euros in bonds to fund gas field

TEHRAN, May 31 - Iran plans to issue bonds worth 1 billion euros to help finance the development of its South Pars natural gas field in the Gulf, Oil Minister Gholamhossein Nozari said in remarks published on Sunday.

Iran sits on top of the world's second-largest gas reserves after Russia but international sanctions on the country over its disputed nuclear plans and other factors have slowed the development of exports.

Analysts say Iran needs more foreign investment and technology to help expand capacity but U.N. and U.S. sanctions are deterring energy companies, especially Western ones.

Nozari, quoted by the semi-official Mehr News Agency, did not give details on when and where the bonds would be issued.

It would be a rare move in recent years by the world's fifth-largest crude exporter to tap investors for loans in non-Iranian currencies.

"With the approval of the government, 1 billion euros worth of bonds will be issued for the development of South Pars phases," he said.

The state oil firm has estimated annual investment needs at $25-30 billion in Iran's oil and gas sector. But major energy firms such as Royal Dutch Shell and Total have either delayed or scrapped large projects in Iran.

Nozari, who was speaking at a ceremony for the signing of a $5 billion contract for the development of South Pars phases 20-21 with an Iranian consortium, said money from Iran's Oil Stabilisation Fund could also be used.

"In this connection there will be $2 billions taken from the fund, of which the bulk is for the development of South Pars," he said.

In addition, Nozari suggested that about 3 percent of Iran's oil income was already being used for energy sector development, including South Pars.

"It is predicted that with the improvement in the global oil market in the months to come there will be more speed in the development of South Pars phases," he said.

In November, a central bank official was quoted as saying Iran was considering a return to international debt markets with bonds worth $1 billion, for the first time since its last Eurobond matured in April 2008.

Analysts have said that international credit conditions may make it difficult for Iran to raise funds and that financial and other sanctions on Tehran could deter investors. Many Western banks have cut ties with the country.