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China's CNPC Close to MoU on $3.6B Iran LNG Project

Source: www.gulfoilandgas.com 1/12/2007, Location: Asia

China National Petroleum Corp. is close to signing a memorandum of understanding to invest around $3.6 billion for developing Iran's South Pars natural gas field, a Chinese official familiar with the deal said Friday.

The MoU with Iran's oil ministry will involve a pledge by CNPC to spend around $1.8 billion on exploration and production in the SP14 gas block in the field and a further $1.8 billion on building a liquefied natural gas plant, the official said.

State-owned CNPC is in talks with Norway's Statoil ASA (STL.OS) about joining the SP14 project, the official added.

SP14, located in the middle-to-southern part of the South Pars gas field, has estimated natural gas reserves of 370 billion cubic meters.

According to the plan, 4.5 million tons of LNG annually can potentially be shipped to China from the LNG facility built by CNPC.

A separate official at China National Oil and Gas Exploration and Development Corp., a unit of CNPC which does international E&P work, confirmed to DJN that talks with Statoil were taking place on the project.

A spokesman for China's Foreign Ministry Thursday warned the U.S. not to meddle in its trade relations with Iran, stating that energy cooperation was legitimate.

Washington has raised concern over plans by state-owned CNOOC Ltd. to invest $16 billion on developing Iran's North Pars field and building LNG facilities.

Chinese oil companies have been actively seeking gas resources in Iran as they draft plans to build 10 LNG receiving terminals on China's eastern coast over the next five to 10 years.

PetroChina Co. (PTR) has secured a long-term LNG deal from the development of the SP11 block in South Pars, where French giant Total S.A. (TOT) has a leading stake. Total is to sell PetroChina a minimum of 4 million tons of LNG annually for 25-30 years, which will be unloaded at the Chinese company's terminal at Tangshan in northern China.

Sinopec Group is in talks with Iran on a 25-year LNG contract and the development of Iran's Yadavaran oil field.

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