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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The Chinese firm is reported to have withdrawn from the project that was seen by Tehran as heralding a new dawn for Iranian oil and gas development.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
COMMENTARY
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Oil Minister Bijan Zangeneh has said that CNPC has withdrawn from South Pars phase 11.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 on 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 (CNPC) has withdrawn from a multi-billion dollar deal to develop phase 11 of Iran’s giant South Pars (SP11) natural gas field in the Persian Gulf.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 Minister 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 intended to invest an initial $1bn under its phase 11 contract, focused on a section of the field near the South Pars Oil Layer, adjacent to areas of the gas field under Qatar’s control.
Change of heart
In mid-August, discussions between CNPC and Tehran were reported by state media as still ongoing regarding SP11, following efforts in July by Iranian Oil Minister Zangeneh to clarify the Chinese firm’s intentions for the project.
CNPC owned an 80.1% stake 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 was still in talks with 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 at 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 possibly becoming a bargaining chip in the
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