By Miriam Malek

LONDON--Austria's OMV (OMV.VI) has inked a memorandum of understanding with National Iranian Oil Company to develop Iran's upstream oil and natural gas sector.

The deal is the first agreement OMV has signed with an Iranian company since sanctions gainst Iran were lifted and it is one of the first European companies to ink an MOU in the post-sanctions environment.

In a statement released by OMV, the company said it will work with Iran to explore the hydrocarbon potential in the Fars area. NIOC and OMV have agreed a two-year timeline to complete studies.

The company will also look at developing enhanced oil recovery in the Cheshmeh Khosh and Band-E-Karkheh fields. The latter field was discovered in the Mehr block which OMV operated prior to sanctions.

Among the European countries that have already signed MOUs are Italy's Saipem SpA (SPM.MI) and France's Total SA (TOT), but these have not been focused on development in the upstream sector.

Iran's upstream sector lacks foreign investment. Many banks are still cautious about going into Iran while U.S. sanctions, related to terrorism, are still in place. The U.S. sanctions prevent companies from transacting with Iran using the dollar.

OMV has previously been active in Iran, working with the company as the operator of the Mehr exploration block.

Write to Miriam Malek at miriam.malek@wsj.com @WSJenergy

(END) Dow Jones Newswires

May 04, 2016 09:19 ET (13:19 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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