CNPC attributes the delays at South Pars to NIOC’s auditing processes.
China National Petroleum Corp. (CNPC) is in discussions with the National Iranian Oil Company (NIOC) to revive its beleaguered participation in the South Pars Phase 11 project, a source at CNPC with knowledge of the talks told Interfax on Monday.
In 2009, CNPC signed a $4.7 billion contract with NIOC to develop Phase 11 of the South Pars gas field. But in August NIOC warned CNPC that it would seize control of the project if it didn’t speed up development (see Iran threatens to expel CNPC as South Pars development stalls, 15 August 2011).
CNPC took over development of South Pars from French supermajor Total, which was taken off the project with the Iranians accusing it of delaying investment in the project. Total said it withdrew because of international sanctions.
The source, speaking on condition of anonymity because of the sensitivity of the matter, acknowledged that CNPC has progressed slowly at South Pars but attributed the delays to NIOC’s strict auditing practices.
According to the source, the contract stipulates that CNPC will fund development of South Pars Phase 11 and NIOC will repay CNPC through supplies of gas. To avoid cost overruns, NIOC is scrutinising “every penny” that CNPC spends on the project, which has led to the delays, the source added.
In addition, all of the European energy majors have halted commercial activity in Iran and CNPC is under pressure from the United States to do likewise. “CNPC has been plagued by difficulties injecting construction funds into the project due to US sanctions [on Iran],” the source said, adding that CNPC has slowed oil and gas investments in Iran this year to appease the US.
The US, European Union and United Nations have all imposed sanctions on Iran because of its nuclear power programme, which some claim is being used as a cover to develop nuclear weapons. Last Wednesday, the US House Committee on Foreign Affairs agreed unanimously to tighten sanctions on the country, a move likely to compound CNPC’s difficulties in advancing its Iranian projects. The new provisions restrict foreign subsidiaries of US companies from doing business with Iran, while also prohibiting landing rights in the US to vessels that have recently visited Iran. The bill also targets North Korea and Syria.
“This [the tightened sanctions] will definitely create more obstacles for Chinese oil and gas development in Iran,” Xia Yishan, director of the China Institute of International Studies’ Energy Strategy Research Centre, told Interfax on Monday.
The delay at South Pars has had repercussions for other Chinese firms operating in Iran. On 11 October, Iran suspended a $16 billion contract with China National Offshore Oil Corp. over the development of the North Pars gas field until “[CNPC] fulfills their commitments in Iran’s South Pars gas field, which is Iran’s first priority,” Mousa Souri, managing director of Pars Oil and Gas Co., which operates both fields, told Iran’s Mehr news agency at the time (see Iran suspends North Pars talks with China, 12 October 2011).
South Pars, estimated to hold 13 trillion cubic metres of gas, is considered a high priority project by the Iranian government. According to a statement on 10 October from Souri, $15 billion will be invested annually in the project over the next four years, with the aim of bringing all phases of the field on-stream by 2015.
CNPC in talks with Iran to revive South Pars development
CNPC attributes the delays at South Pars to NIOC’s auditing processes.
China National Petroleum Corp. (CNPC) is in discussions with the National Iranian Oil Company (NIOC) to revive its beleaguered participation in the South Pars Phase 11 project, a source at CNPC with knowledge of the talks told Interfax on Monday.
In 2009, CNPC signed a $4.7 billion contract with NIOC to develop Phase 11 of the South Pars gas field. But in August NIOC warned CNPC that it would seize control of the project if it didn’t speed up development (see Iran threatens to expel CNPC as South Pars development stalls, 15 August 2011).
CNPC took over development of South Pars from French supermajor Total, which was taken off the project with the Iranians accusing it of delaying investment in the project. Total said it withdrew because of international sanctions.
The source, speaking on condition of anonymity because of the sensitivity of the matter, acknowledged that CNPC has progressed slowly at South Pars but attributed the delays to NIOC’s strict auditing practices.
According to the source, the contract stipulates that CNPC will fund development of South Pars Phase 11 and NIOC will repay CNPC through supplies of gas. To avoid cost overruns, NIOC is scrutinising “every penny” that CNPC spends on the project, which has led to the delays, the source added.
In addition, all of the European energy majors have halted commercial activity in Iran and CNPC is under pressure from the United States to do likewise. “CNPC has been plagued by difficulties injecting construction funds into the project due to US sanctions [on Iran],” the source said, adding that CNPC has slowed oil and gas investments in Iran this year to appease the US.
The US, European Union and United Nations have all imposed sanctions on Iran because of its nuclear power programme, which some claim is being used as a cover to develop nuclear weapons. Last Wednesday, the US House Committee on Foreign Affairs agreed unanimously to tighten sanctions on the country, a move likely to compound CNPC’s difficulties in advancing its Iranian projects. The new provisions restrict foreign subsidiaries of US companies from doing business with Iran, while also prohibiting landing rights in the US to vessels that have recently visited Iran. The bill also targets North Korea and Syria.
“This [the tightened sanctions] will definitely create more obstacles for Chinese oil and gas development in Iran,” Xia Yishan, director of the China Institute of International Studies’ Energy Strategy Research Centre, told Interfax on Monday.
The delay at South Pars has had repercussions for other Chinese firms operating in Iran. On 11 October, Iran suspended a $16 billion contract with China National Offshore Oil Corp. over the development of the North Pars gas field until “[CNPC] fulfills their commitments in Iran’s South Pars gas field, which is Iran’s first priority,” Mousa Souri, managing director of Pars Oil and Gas Co., which operates both fields, told Iran’s Mehr news agency at the time (see Iran suspends North Pars talks with China, 12 October 2011).
South Pars, estimated to hold 13 trillion cubic metres of gas, is considered a high priority project by the Iranian government. According to a statement on 10 October from Souri, $15 billion will be invested annually in the project over the next four years, with the aim of bringing all phases of the field on-stream by 2015.