TEHRAN Deputy Oil Minister Seyed Mahdi Hosseini and the deputy executive director of the South Korean Export and Import Bank signed a memorandum of understanding (MOU) stating that the South Korean bank will loan Iran $2 billion for the development of Iranian oil and gas projects between 2002 and 2006, the Public Relations Office of the Oil Ministry announced on Thursday. Similar agreements had previously been signed with Japan and European states. This is the first time Korea has signed such an MOU, indicating that Iranian oil and gas projects have become more competitive.

Meanwhile, the Public Relations Department of the Oil Ministry announced on Thursday that the first phase of the South Pars gas field will go on stream by March 2003. The director of the first phase of the South Pars Gas Field, Mohamad Ali Shakarkhab, who is part of a delegation accompanying the Iranian oil minister to South Korea, said that the project is 83 percent complete and that 12 gas wells have also been drilled

Shakarkhab also said that the pipeline for the export of liquid natural gas (LNG) and storage tanks have been completed.

He said that financial problems, the contractor's inexperience and a delay in the delivery of equipment were the reasons for the delay in completion of the project.

When on stream, the first phase of the South Pars Gas Field is projected to produce 40,000 barrels of natural gas and 200 tons of sulfur per day, which will earn about 2 million dollars of revenue.

This is while, Iran's Oil Minister Bijan Namdar-zangeneh who arrived Seoul atop an economic delegation for a three-day visit , met and conferred with South Korean Minister of Commerce, Industry and Energy Shin Kook Hwan.

During the meeting Hwan referred to his last year trip to Tehran and recalled his meeting with President Seyed Mohammad Khatami, evaluating the past couple of years' developments in the two countries' relations as "sensitive and important."

He meanwhile begged the Iranian oil minister's pardon for the Ninetieth Minute cancellation of his scheduled meeting with South Korean President Kim Dae Jung due to his illness and being hospitalized.

Zangeneh said that the ground is quite paved today for the expansion of bilateral relations, particularly in the field of oil and gas activities, evaluating the quality of services provided by South Korean firms in such fields as "satisfactory" and their experience as "invaluable."

Listing Iran's priorities in oil, gas and petrochemical industries, the oil minister proposed closer cooperation between Iran and South Korea in manufacturing special cargo ships for liquid natural gas (LNG).

He also asked the Korean side to play a greater role in making investment in Iran, thus strengthening the foundations of bilateral economic ties.

The Iranian oil minister also elaborated on the effects of the ongoing global developments on oil market, seeking closer cooperation of South Korea at international scenes in that regard.

Zangeneh is due to meet several Korean officials, including the minister of trade, industry and energy, minister of transport and reconstruction and trade minister.

He is further expected to meet with the head of the Exim Bank and construction executives of South Korea.

Economic relations between Iran and South Korea have been increasing since 1998 with trade transactions topping $3.76 billion in 2000, up by $1.4 billion from the previous year.

Early this year, South Korea's Hyundai Engineering and Construction Company won a record $1.2 billion order to build a gas plant in Iran.

The gas-processing plant, located in the Persian Gulf port of Assaluyeh, will be similar to a one-billion-dollar project Hyundai won three years ago in the same area.

Factors behind the increase in trade ties between Seoul and Tehran were the participation of South Korean firms in Iran's long-term economic projects such as construction of power stations and petrochemical plants as well as the expansion of Iran's non-oil exports.