It was confirmed to China Daily yesterday by a press
official with the Iranian Embassy that an initial agreement on a
massive natural gas project has been signed by China's top offshore
oil producer and its Iranian counterpart.
"A big deal was hammered out on Wednesday between the two
countries to jointly produce natural gas in Iran," the Iranian
diplomat revealed on condition of anonymity. He said details on the
agreement required endorsement from the ambassador.
According to Iran Daily the National Iranian Oil
Company and China National Offshore Oil Corp (CNOOC) signed a
memorandum of understanding on the development of the North Pars
gas field on Wednesday. The field holds an estimated 80 trillion
cubic feet of natural gas, according to the paper.
The project involves an investment of more than US$16 billion of
which US$11 billion will be spent on the downstream part and the
rest on the upstream segment.
According to the preliminary agreement gas from the field will
be liquefied and divided equally between the two companies. The
project is expected to take eight years to bear fruit, Iran
Daily reported.
CNOOC wouldn't confirm the deal yesterday only saying the firm
has been in touch with its Iranian counterpart on such a project
for a long time. "We have been in close contact for a while. But it
is premature to release the results of any negotiations at the
present time," spokesman Liu Junshan told China Daily.
An industry insider told China Daily that under the
terms of a planned agreement signed as early as October the
National Iranian Oil Company offered CNOOC a 25-year gas supply
from the North Pars field.
Lee Meileng, chief analyst of Platts' Beijing office, said the
reported deal will be a shot in the arm for both CNOOC and China as
a whole from business and energy supply perspectives. Platts is the
world's largest provider of energy information and market
research.
"By participating in and having ownership of overseas energy
projects Chinese oil companies can better safeguard energy safety
for China as a major energy consumer, said Lee. "They themselves
can also benefit from this kind of participation by taking
advantage of hefty global energy prices."
The Platts analyst explained that CNOOC's share of gas from the
reported joint program in Iran could either meet robust demand from
liquefied natural gas (LNG) terminals built by CNOOC in the coastal
areas of China or be sold on the global market.
"Either will be positive for CNOOC and China. Therefore, I see
this move as good from both a business and energy supply
perspective," said Lee.
Agreeing with that observation Zhou Dadi, former director of the
National Development and Reform Commission's Energy Research
Institute, said compared with simply importing oil or gas from
abroad, investing and getting involved in overseas projects was
more cost-effective and a safer way of ensuring consistent energy
supplies.
CNOOC, as China's largest offshore oil supplier, plans to build
as many as seven LNG-importing terminals in six provinces and
municipalities. By the end of October only two of them had secured
government approval.
"Only with a secure and consistent gas supply can LNG terminal
construction be meaningful and gain approval," said Lee.
(China Daily December 22, 2006)