TOKYO, 7 October 2006 — Japan’s INPEX Holdings Inc. has lost the right to lead the $2-billion-plus development of Iran’s Azadegan oil field, but will retain a token share in the OPEC member’s biggest find in three decades.

In a blow to Japan’s hopes for enhanced energy security, INPEX Director Katsujiro Kida told reporters yesterday its stake in the project had been cut to 10 percent from the 75 percent share agreed in February 2004 after last-minute talks this week. But operational responsibility for Azadegan, believed to hold more than enough crude to meet Japan’s total import needs for three years, is being transferred to Iran, which has said it may give the field over to Russian, Chinese or Iranian firms.

While a setback for the Japanese government, which owns the biggest share of its top energy explorer, the news may be a political victory for the United States, which has strongly opposed it and stepped up pressure this year as Tehran pursued nuclear work.

INPEX said Iran’s delay in clearing land mines from the area as well as spiralling investment costs caused the cut, but Iran has threatened for months to strip Japan of the rights if it did not move more quickly to begin drilling. “Our company has other projects and our business is expanding rapidly,” Kida said. “It is a matter of balancing financial resources.” He said the area was now 95 percent clear of land mines laid during the 1980-1988 Iran-Iraq War, not enough to begin work. INPEX itself has spent about 10 billion yen ($85 million).

Losing Azadegan may endanger Japan’s efforts to lift the share its companies produce overseas to the equivalent of 40 percent of the country’s oil imports by 2030 from 15 percent. At its peak the field is expected to pump about 260,000 barrels per day (bpd), equal to just over 5 percent of its imports.

But it is also a blow for Iran, the world’s fourth-biggest producer, which has struggled to secure investment to help offset the 10 percent or more decline in its older oil fields.

It was unclear what impact the news would have on European major Total’s efforts to secure a small stake of about 15 percent in Azadegan from INPEX. A spokeswoman for Total declined immediate comment.

Kida said he did not know whether Iran would immediately give partial stake in Azadegan to other countries or companies.

Azadegan was to have been the jewel in Japan’s overseas oil holdings, making up for its loss in 2000 of operating rights to the Saudi-Kuwait neutral zone and helping it keep up with China and India’s aggressive state-owned companies, now scouring the globe for energy resources to feed their fast-growing economies. But talks on the project — estimated to cost about $2 billion when agreed two and a half years ago — stalled, with INPEX citing operational issues but analysts suspecting a political dimension that may have grown more pronounced this year.

Kida said INPEX had wanted to retain some share in Azadegan to leave open the door to further investments in the world’s second-biggest holder of oil and gas reserves, and denied any government pressure to pull out.

“Our company did not get any political instructions from the Trade Ministry,” he said. Resource-poor Japan has been in a difficult spot after Iran’s nuclear aims surfaced, stuck between the need to meet its energy requirements and its desire to keep in line with Washington, its closest security ally.