* U.S. oil firms planned to meet Iran oil minister at UN
* Prepared to invest post-sanctions, if terms attractive
* Iran oil minister orders review of oil investment contract
* European majors Shell, Total may seek to return
By Peg Mackey
LONDON, Oct 4 (Reuters) - The tempting taboo of Iran's oiland gas riches has moved a step nearer for Western oilcompanies, lining up to woo Tehran if sanctions finally succumbto a diplomatic thaw.
U.S. oil firms - barred by Washington from Iran for nearlytwo decades - planned to meet Oil Minister Bijan Zanganeh lastweek at the United Nations, encouraged by the new tone inTehran, industry sources said.
"We're willing to talk: Iran's got tremendous potential,"said a senior executive from a major U.S. oil company whorequested anonymity while preparing for exploratory talks.
"Once sanctions are removed, we'd definitely be interestedin investing, but the contract terms have got to be attractive."
U.S. companies Conoco, Chevron, Exxon Mobil and Anadarko have all shown varying degrees ofinterest in the Islamic Republic ever since Tehran nationalisedits energy sector in 1979.
That move ejected major Western players including BP - doubly tainted in Iranian eyes for its history there datingback to the political turmoil of the 1950s and beyond.
Zanganeh served as oil minister under Iran's reformistgovernment from 1997-2005. He intended to travel with PresidentHassan Rouhani to New York, but called off the trip at the lastminute, the sources said.
Executives from U.S. and European companies will be seekingnew opportunities to meet with Iranian oil officials on neutralground, industry sources said. U.S. and European companiescontacted by Reuters declined comment for this story.
"There is no embargo on talks," said a senior European oilexecutive, who requested anonymity.
In step with his president's efforts to end sanctions,Zanganeh has re-appointed Western-friendly oil experts,including his former deputy, Mehdi Hosseini, and ordered areview of Iran's buy-back contracts that compensate foreigninvestors with production.
"Iran is in very dire need of foreign investment," saidconsultant Mehdi Varzi, formerly of the National Iranian Oil Co."There needs to be a wholesale change of thinking."
Oil executives expect any progress to be very slow. They areused to playing a long game.
U.S. oil firms have made some abortive approaches over theyears, but have been forced to watch as European rivals,principally Royal Dutch Shell and France's Total stole a march on Iran, the world's no. 1 holder of gasreserves and fourth biggest oil reserves.
Back in 1995, Conoco struck a deal with Tehran forthe offshore Sirri oilfield, but the Clinton Administrationblocked it, calling the agreement a threat to national security.
The contract went to Total and Washington has ruled out Iranfor U.S. oil companies ever since, but it could not stop themfrom talking with Iranian officials and looking at their oildata.
In the early 2000s, Conoco and Chevron showed interest inprized Iranian assets including the giant Azadegan oilfield thatnudges up against Iraq's Shell-operated Majnoon field, and thehuge South Pars gas field that Iran shares in Gulf waters withQatar, where it is known as the North field.
Oil company top brass regularly called on Washington to liftthe unilateral sanctions that locked them out of Iran.
But any hopes of a U.S. softening towards former reformistPresident Mohammad Khatami came to a halt in January 2002, whenPresident George W. Bush in a state of the union address namedIran as part of an "axis of evil".
Oil companies shifted their focus to neighbouring Iraq.
EUROPE'S POLE POSITION
The United States tried to keep Europe's oil majors out ofIran with the Iran-Libya Sanctions Act, which requiredWashington to impose sanctions on foreign companies thatinvested more than $20 million a year in its energy sector.
But the U.S. law proved toothless. One of Zanganeh'scrowning achievements from his previous stint as oil ministerwas to get Total, Shell and Italy's Eni into Iran -securing over $10 billion of investment in the process.
Steady pressure from Washington and tougher sanctions havemanaged, however, to keep European oil companies out of Iransince the late 2000s.
Their past experience there is expected to put Shell andTotal in a strong position if, as expected, they seek a return,say analysts. Chevron, Conoco, Statoil, Lukoil and Gazprom may also chase opportunities,they said.
When the day comes for sanctions to be lifted, Iran mustkeep neighbouring Iraq in mind, say analysts. Experts say Iran'soilfields could ramp up to 3 million bpd within months and reachto 3.6 million about a year later.
"Iran must realise it's competing against other producersand offer terms that are at least as good, if not better," saidVarzi, who now runs an energy consultancy in Britain.
Shell, Total, BP and Exxon Mobil have signed servicecontracts with Iraq that are designed to raise productiontowards 9 million bpd by 2020.
Baghdad's bold oil expansion has already pushed it to 3million bpd and vaulted it to second position among producers inthe Organization of the Petroleum Exporting Countries, abovefellow-member Iran.
Zanganeh has set up a special committee to review andimprove its buy-back investment model and put Hosseini, anegotiator trusted by Western oil firms, in charge.
Critics of Iran's buy-backs complain of being unable to bookreserves and want longer-term more flexible arrangements.
"Iran's buy-back contracts are a complete waste of time.They're too complicated, take years to negotiate and offer poorreturns on investment," said Varzi.
Although the oil majors complain of poor returns in Iraq,Iranian oil officials say they see the merit of Baghdad'sfee-based service contracts.
"Iraq's service contract could be appropriate for Iran'senhanced recovery projects. We want to accommodate both sidesand would like to brainstorm with the major oil companies,"Hosseini told Reuters.
"We want a win-win contract."
