CNOOC and NIOC agree on development plan for North Pars gas field

Nov 12, 2008 01:00 AM

National Iranian Oil Co. (NIOC) has finalized a development plan for Iran's huge North Pars gas field with China National Offshore Oil Corp. (CNOOC), and is now negotiating the price of the gas, an NIOC board member said.
Mohammad Ali Emadi, who is NIOC's director of research and development, told that the price of the gas and other outstanding terms may be agreed "in less than one month," paving the way for the multibillion dollar deal to be made public.

The comments follow a visit to China in early October by NIOC Managing Director Seifollah Jashnsaz, with a view to firming up a deal that has been in the works since NIOC and CNOOC signed a memorandum of understanding to develop North Pars in late 2006.
The two sides were expected to commit to develop the North Pars gas field in February, but the $ 16 bn contract went unsigned after CNOOC officials cancelled a visit to Tehran at the last minute. At the time, the US vowed to scrutinize any deal to see if it violates US sanctions against Iran.

Ali Vakili, the managing director of Pars Oil and Gas Co., said "a contract for the development of the North Pars gas field has been signed" with an unnamed party.
Emadi said NIOC and CNOOC had agreed on a development plan that encompasses both the production of gas at the wellhead and investment in a plant to turn it into liquefied natural gas, without specifying exact volumes.

Emadi said the agreement with CNOOC would last for at least 25 years.
"We finalized a discussion about the plan for the liquefaction and LNG (in October), and some of the package which is very important, such as the price of the gas, is coming closer, maybe less than one month," Emadi said.

Analysts are sceptical that Iran will be able to secure liquefaction technology to meet its contractual commitments. It has so far struggled to seal agreements on its natural gas reserves with foreign investors because of spiralling costs and US sanctions.
CNOOC -- the state-owned parent of Hong Kong-listed CNOOC Ltd. -- doesn't have its own proprietary liquefaction technology. However, it has been investing heavily in LNG with a string of regasification terminals being built along China's southern and eastern coast.

The deal CNOOC planned to sign in February envisaged 10 mm tons of LNG exported annually from North Pars to China -- enough to feed three terminals. China, the world's second-largest energy consumer, wants to increase LNG imports to lower its reliance on coal and crude oil.
The North Pars gas field, located 85 km north of the giant South Pars gas field in the Gulf, contains about 80 tcf of gas reserves and each of the four development phases may produce as much as 1.2 bn cfpd of gas.

Iran has the world's second-biggest crude reserves after Saudi Arabia and the second-largest gas reserves after Russia.
CNOOC's agreement with Iran continues a trend of Chinese companies expanding their foothold in the Middle East. The chairman of China National Petroleum Corp. has formally signed the final copy of a $ 3-bn oil service contract with the Iraqi oil ministry to develop the Ahdab oil field in central Iraq, a ministry official said.

CNPC is currently active in Iran in upgrading the veteran Masjed-I-Suleyman oil field under a technical service contract.
In December, China Petroleum & Chemical Corp., or Sinopec, signed a deal to develop Iran's major Yadavaran oil field.

Source / Dow Jones & Company, Inc.
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