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Iran And China Settle Old Differences To Decide Shared Energy Future

Iran And China Settle Old Differences To Decide Shared Energy Future

Iranian Oil Minister Bijan Zanganeh went to Beijing this week to discuss providing increased oil to China, when and if sanctions are lifted, and to settle any differences with Chinese energy companies to ensure that those potential sales proceed smoothly.

Only last week, Iran agreed in principal with a group of world powers to restrictions on its nuclear program in exchange for a phased lifting of international sanctions imposed on it. Those sanctions included halving its oil-export potential from about 2.5 million barrels a day before 2012 to about 1.1 million barrels per day today.

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If this preliminary agreement matures into a firm deal and the sanctions are lifted, the National Iranian Oil Co. said it could greatly increase its exports, especially to energy-hungry China, which it now supplies with about 12 percent of the oil it needs.

Zanganeh arrived in Beijing April 9 on his first such visit since he became oil minister two years ago. Part of his goal is to clear up differences with China over its investments in oil and gas projects in Iran.

Some of Tehran’s post-sanctions oil production is likely to come from projects developed in Iran by the state-owned companies Sinopec Group and the China National Petroleum Co. (CNPC), China’s largest energy group. But these companies have delayed or reduced investment in such projects in the past five years as the sanctions became stricter.

One successful project is the Yadavaran oil field in southwestern Iran, operated by Sinopec, which is 95 percent complete, according to Amir-Hossein Zamaninia, Iran’s deputy oil minister for commerce and international affairs. He said Yadavaran is expected to produce 75,000 barrels of oil per day. Sinopec has invested $2 billion in the field.

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CNPC, meanwhile, had taken on several other projects, including the North Azadegan oil field in western Iran near the border with southeastern Iraq, in which it also invested $2 billion. This field is expected to have a capacity of 120,000 barrels of oil per day.

“The main issue is the money we owe them,”Zamaninia told Reuters. “[The Chinese companies] have worked there [previously], but the return has not started yet.”

There were other problems that are now being resolved, Zamaninia said. For one, in 2012 CNPC had withdrawn from the huge South Pars gas field in the Persian Gulf, shared by Iran and Qatar, because the sanctions made it difficult to get the necessary drilling equipment from US and European sources. This week, though, Zamaninia said, CNPC expressed interest in resuming work there.

Zamaninia indicated that during the current visit, the Iranian delegation wouldn’t discuss any new projects with the Chinese, but would just be resolving existing problems.

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Nevertheless, Moshen Ghamsari, the director of international affairs at the National Iranian Oil Co., said that if the sanctions are eventually lifted, Tehran would ask for help from European companies to make liquefied natural gas (LNG), while limiting China’s contribution to what it’s already contracted to do; develop and produce the gas.

“For LNG we have some contracts with some Europeans that, hopefully after the finalization of the [nuclear] negotiations, then we can receive technology from that side,” Ghamsari said.

By Andy Tully Of Oilprice.com

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