The National Iranian Oil Company (NIOC) will be picking a new contractor to develop South Azadegan oil field whose development contract with a Chinese firm was cancelled.
According to the Iranian news agency Shana, Bijan Namdar Zanganeh, the country’s petroleum minister has said the deal with China National Petroleum Corporation International (CNPCI) was terminated due to the Chinese company’s foot-dragging on the project.
He also said that “there are problems with regards to progress” in Yadavaran oil field which is under development by China’s Sinopec.
The CNPCI signed a deal with the NIOC in 2009 to develop the South Azadegan oil field which Iran shares with Iraq.
The Azadegan field is one of the world’s biggest with estimated reserves of about 42 billion barrels of oil.
China’s biggest oil and gas company signed up to develop Iranian oil and gas fields after Japanese and European companies pulled out due to sanctions in the middle of the last decade according to a report by Reuters.
State-run CNPC has expanded over the past decade to more than 30 countries around the globe to help secure supplies of the oil and gas that China needs to sustain its economic growth. But concern over scarce global oil supplies that drew CNPC into Iran have largely vanished over the last few years, thanks to a surge in production in North America and promising new gas prospects in China itself, Australia and off East Africa.
In 2010, Beijing instructed Chinese energy companies to slow or stop work in Iran, because China wanted to strengthen ties to the U.S. energy sector and feared dealing with Tehran would jeopardise those plans, said Reuters. Over years of Chinese inaction, Iranian officials have been demanding that these companies honour their deals. But CNPC’s rapid global expansion into easier operating environments has reduced the need for it to push on in Iran, it added.
A decree officially excluding CNPC from the Azadegan project near the Iraqi border came into force on Tuesday evening, Shana said. CNPC was unable to comment immediately on the contract termination. Despite its huge gas reserves, Iran has been unable to extract enough to meet even its own needs, further reducing its allure for foreign investors. Rising oil production from neighbouring Iraq, where CNPC is now active, takes further pressure off China to boost output from Iran.
