Iran, China in Talks Over North Pars Gas Field

Source: 11/1/2006, Location: Asia

Iran's state-owned National Iranian Oil Co., or NIOC, is currently in negotiations with China National Offshore Oil Co., or CNOOC, on the development of the offshore North Pars gas field in the Persian Gulf, according to a senior oil official quoted Tuesday. North Pars, a gas field with an estimated 47 trillion cubic feet of recoverable reserves, is 85 kilometers north of the giant South Pars gas field in the Persian Gulf.

CNOOC has already signed a memorandum of understanding with NIOC on upstream and downstream development of the gas field which has been defined in four phases, said Ali Khanchi, director of the North Pars project at the Pars Oil and Gas Co. or POGC. However, investment will be different in the upstream from the downstream sectors, he said without elaborating.

Monday, Iran's Oil Minister Kazem Vaziri Hamaneh said that NIOC is hoping to finalize the contract with the Chinese company by March 2007.

According to Akbar Torkan, the POGC's managing director, the sweet gas from phase one of the gas field has been earmarked for domestic consumption while the yield from phases two, three and four will be exported in the form of liquefied natural gas.

Previously the gas from the three phases had been slated for export in the planned Iran-Pakistan-India gas pipeline. But since the Iran-Pakistan-India pipeline talks stalled over a price formula, the Iranians have decided to convert the gas produced at this field to LNG, said Torkan.

Under the MOU, CNOOC will be in charge of setting up the facility to convert the gas to LNG, as well as the transportation and marketing, Khanchi said. If the agreement is finalized, Iran will be committed to selling the gas from the field at 'a defined formula' for 25 years to CNOOC, he added.

Exports of Iranian LNG to China is part of a larger package that also includes the development of Yadavaran oil field by China. Yadavaran is one of Iran's largest onshore oil fields in Khuzestan. The package is thought to be worth around $100 billion.

The NIOC is also in negotiations with China Petrochemical Corp., or Sinopec, over the development of the Yadavaran oil field. The pace of negotiations on both parts has slowed recently as Tehran faces the prospect of sanctions over its nuclear program.

Iran has the world's second largest gas reserves after Russia.

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