Regional LNG: Iran, China in $70b LNG deal
Saturday, October 30 2004 - 02:07 AM WIB
Under a memorandum of understanding signed on Thursday, China?s second-largest oil firm Sinopec Group will buy 250 million tonnes of LNG over 30 years from Iran and develop the giant Yadavaran oilfield, said Seyed Mehdi Hosseini, deputy general manager of the National Iranian Oil Company (NIOC).
"We?ve committed to sell Sinopec ? after commissioning of the field ? 150,000 barrels per day of crude for 25 years at market prices," Hosseini told Reuters. Sinopec officials were not immediately available for comment.
But LNG deliveries will not begin for at least five years as Iran struggles to catch up with industry frontrunners such as Qatar and Algeria, while the estimated 3-billion-barrel Yadavaran field in the southwest will take at least four years to develop.
No timeframe has been set for finalising the investment and negotiations over Iranian oil deals often drag on for years. Iran is seeking a similar oilfield development and LNG supply deal with China National Petroleum Corp (CNPC), the country?s largest state oil giant and parent of New York and Hong Kong-listed PetroChina, Iranian officials said.
"We signed something more general with CNPC this morning. But it?s the beginning of further cooperation," NIOC legal head Zein-al-Din said, adding that a similar deal would be pursued soon.
Iranian Oil Minister Bijan Zanganeh is on the last day of a two-day visit to Beijing to boost ties with China, whose biggest oil supplier is Iran, contributing 14 per cent of imports.
Chinese firms have been prominent investors in Iran?s oil industry, including Sinopec?s construction of a huge oil terminal on the Caspian and deals to upgrade several refineries.
European and Asian oil firms have also pursued Iranian deals despite ILSA, most notably Japanese INPEX?s $2 billion agreement to develop the Azadegan field this year.
China leapfrogged Japan last year as the world?s second-largest energy consumer, with oil demand growth expanding by nearly 15 per cent and companies keen to secure direct oilfield access to feed booming import needs.
That drive is putting China in direct competition with other fast-growing Asian economies such as India as well as the United States, the top energy user, all of whom are having to source for more imported crude as domestic production declines.
Major oil exporters, particularly in the Middle East, are also anxious to boost relations with the world?s most populous nation, which will provide a market to ensure future projects.
Chinese state oil trader Zhuhai Zhenrong Corp agreed earlier this year to buy more than 110 million tonnes of LNG from Iran over 25 years for $20 billion.
But China has also signed up for purchases of LNG ? natural gas supercooled to a liquid state for loading onto tankers ? with Australia and Indonesia.
Hosseini said the Yadavaran oilfield, which officials estimated earlier this year could hold more than 3 billion barrels of recoverable reserves, would have a total production capacity of around 300,000 bpd. The deal ? under an emerging framework by which Iran ties LNG purchases with oilfield development ? is seen as more beneficial for Sinopec than the traditional buyback contracts, which apply to most foreign development deals in Iran.(*)