Iran Warns Largest Chinese Oil Company of Losing Its $4.7 Billion Contract
CNPC, China's biggest state oil and gas group, has been warned by Iran to speed up work at the giant South Pars natural gas field or risk losing the multi-billion-dollar deal.
Ahmad Qalehbani, deputy minister of oil, told reporters in Tehran that the Chinese are delaying development work on the phase 11 of the South Pars gas field, phases. Qalehbani said as a result of the delays, CNPC is on the verge of losing its contracts to Iranian firms [Mehr News Agency, 2 September]. The CNPC contract was signed in 2010 and is worth $4.7 billion.
China’s second largest oil and gas company, the Sinopec Group, has also delayed the start date of the $2 billion Yasavaran oil field development. In late 2010, CNOOC, China’s third largest oil company pulled its team from North Pars gas venture.
The behavior of China’s three largest oil and gas companies cannot possibly be coincidental and must reflect the current strategy of the Chinese leadership toward Iran. Even though China had recently accelerated its purchase of the Iranian crude, but it appears to be hesitant to start or complete development work in Iran’s oil and gas fields. This hesitancy is a direct result of China’s eagerness not to challenge or offend the US and its sanctions against foreign investments in Iranian oil and gas sector. The crude oil purchase, however, is not subject to those sanctions and hence China’s willingness to increase its purchases.
Loss of Chinese largest firms as investors in developing oil and gas fields in Iran could cause serious problems for the country’s oil industry, especially considering that not long ago China was probably the last major economy left that was willing to ignore US sanctions on investments.