Page 4 - MEOG Week 40

MEOG Commentary MEOG
From bad to worse for
Iran as CNPC withdraws
from South Pars
The Chinese firm is reported to have withdrawn from the project that was seen by Tehran as heralding a new dawn for Iranian oil and gas development. As with the rest of the projects in the country, Iranian firms will have to go it alone.
Iran
What:
Oil Minister bijan Zangeneh has said that CNPC has withdrawn from South Pars phase 11.
Why:
The move follows significant pressure from the uS for all governments and companies to alienate Tehran, particularly in terms of developing oil and gas assets.
What next:
As with other projects, domestic Iranian firms are likely to progress alone, though the chances of reaching the same output goals are slim.
ChInA national Petroleum Corp. (CnPC) has withdrawn from a multi-billion dollar deal to develop phase 11 of Iran’s giant South Pars (SP11) natural gas field in the Persian Gulf.
The news was announced by Iranian Oil Min- ister Bijan Zangeneh on the website of official Iranian energy news agency Shana on October 6.
The Chinese firm became the lead investor in SP11 after France’s Total withdrew from the investment in August 2018 citing the threat of incurring US sanctions should it go ahead with plans.
Zanganeh added that Iranian company Pet- ropars would “carry out the job” in place of the Chinese investor. Petropars is owned by the naftiran Intertrade Co. (nICO), a subsidiary of the national Iranian Oil Co. (nIOC).
Total had planned to invest an initial $1bn under its phase 11 contract, focused on a section of the field near the South Pars Oil Layer, adja- cent to areas of the gasfield under Qatar’s control.
Change of heart
In mid-August, discussions between CnPC and Tehran were reported by state media to still be ongoing regarding SP11, following efforts in July by Zangeneh to clarify the Chinese firm’s inten- tions for the project.
CnPC held a stake of 80.1% in SP11, with the remainder held by Petropars.
Zangeneh said at the time that a request from CnPC to suspend operations on the project had been rejected, with the Chinese company reti- cent to carry out development work amid the threat of sanctions from the US.
he said that if CnPC did not intend to pro- ceed with SP11 in a timely fashion, then it would have to “pull out of the contract, which if so, its share would be transferred to Iran’s Petropars”.
however, Mohammad Meshkinfam, the CEO of the Pars Oil and Gas Co. (POGC) told Shana that his firm is still in talks with the CnPC.
POGC is in charge of the overall management of the South Pars field.
CnPC originally negotiated a 30% stake in the $4.879bn project in July 2017, with French super-major Total taking operatorship of the project and a 50.1% stake and Petropars holding 19.9% under the Integrated Petroleum Contract (IPC) model. SP11’s production target was set at the time to 20.8bn cubic metres per year.
China’s eventual level of commitment to investing in South Pars phase 11 and other pro- jects in Iran, as well as to buying Iranian crude oil, may depend on how its trade war talks with the US evolve, with Chinese policy on Iran pos- sibly becoming a bargaining chip in the negotia- tions with Washington.
It is unknown whether fellow Chinese state firm Sinopec is still in discussions regarding the second phase of the Yadavaran oilfield.
Following Sinopec’s offer of more than $3bn to fund the development of Yadavaran in early 2019, the managing director of the local Petroleum Engineering and Development Co. (PEDEC) said during the summer that negoti- ations were ongoing for phase two. The Chinese firm is said to believe that its efforts to work on the field would not be subject to US sanctions because it was first signed in 2007.
PEDEC’s Touraj Dehqani was quoted by state media outlet ISnA as saying: “Talks are still ongoing, but the process is going on at a slow pace.”
Sinopec has so far invested $2bn in Yadav- aran, having taken over as operator in 2008 when production was running at 25,000 barrels per day. Output is now around 120,000 bpd. The second phase entails the drilling of 105 wells to achieve 180,000 bpd, with Phase 3 targeting out- put of 300,000 bpd.
South Pars is Iran’s largest gas field and forms part of the world’s single largest gas deposit, which it shares with Qatar, while Yadavaran is
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w w w . N E W S B A S E . c o m Week 40 08•October•2019