Japan and Iran have signed a $3 billion pre-finance advance facility under a deal that gives a consortium of Japanese firms preferential negotiating rights to develop part of the Azadegan oil field, the Middle East Economic Survey (MEES) said yesterday.

The agreement was signed between the Japan Bank of International Cooperation (JBIC) and Naftiran Intertrade Co (NICO), the international marketing unit of the National Iranian Oil Co. JBIC agreed to facilitate advance payments for crude oil purchases.

"Under the agreement, MEES understands that $1 billion will be paid to NICO before the end of this fiscal year in Japan (by the end of March) and two further payments of $1 billion will be made at one-year intervals," the industry newsletter said. "In return NICO is to provide Japan with an equivalent amount of crude oil on a stable basis for 11 years," it added.

Iran gave Japanese firms priority negotiating rights for the appraisal and development of a sector of the giant Azadegan oil field when President Mohammed Khatami visited Japan last November.

The field has estimated recoverable reserves of at least five to six billion barrels and 26 billion barrels of in-place reserves. Iran discovered Azadegan in 1999, the largest oil find since Russia found the Priobye field in 1982. Japan is almost entirely dependent on imports for its crude oil, of which more than 80 per cent comes from the Middle East.

The Tokyo government is eager to see Japanese firms win the right to develop Azadegan, particularly after Tokyo-based developer Arabian Oil Co Ltd lost its oil concession in the Saudi Arabian part of the Neutral Zone in February last year.

MEES said JBIC and Iran's Bank Mellet signed an agreement this month to finance projects awarded by subsidiaries of Iran's National Petrochemical Co. The first credit, amounting to 28.1 billion yen ($229.8 million), is to fund a 33 billion yen ($269.9 million) deal awarded by Borzouyeh Petrochemical Co to Toyo Engineering, Korea's LG Engineering and Iran's Sazeh for the building of the Aromatics 4 project at Bandar Assaluyeh.

The second credit involves a 18.8 billion yen ($153.8 million) loan to fund a 22 billion yen ($179.9 million) contract awarded by Shahid Tondgooyan Petrochemical Co to Mitsubishi Heavy Industries, Tomen and Iran's Chagalesh Consulting Engineers for construction of a purified terephthalic acid plant.