CNOOC, NIOC Agree on Development Plan for Iran N Pars Gas Field

North and South Pars Fields
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BEIJING (Dow Jones Newswires), November 12, 2008

National Iranian Oil Co. has finalized a development plan for Iran's huge North Pars gas field with China National Offshore Oil Corp., and is now negotiating the price of the gas, an NIOC board member said.

Mohammad Ali Emadi, who is NIOC's director of research and development, told Dow Jones Newswires that the price of the gas and other outstanding terms may be agreed "in less than one month," paving the way for the multibillion dollar deal to be made public.

The comments follow a visit to China in early October by NIOC Managing Director Seifollah Jashnsaz, with a view to firming up a deal that has been in the works since NIOC and Cnooc signed a memorandum of understanding to develop North Pars in late 2006.

The two sides were expected to commit to develop the North Pars gas field in February, but the $16 billion contract went unsigned after Cnooc officials canceled a visit to Tehran at the last minute. At the time, the U.S. vowed to scrutinize any deal to see if it violates U.S. sanctions against Iran.

Ali Vakili, the managing director of Pars Oil and Gas Co., said "a contract for the development of the North Pars gas field has been signed" with an unnamed party, the ISNA news agency reported Tuesday.

Emadi said NIOC and Cnooc had agreed on a development plan that encompasses both the production of gas at the wellhead and investment in a plant to turn it into liquefied natural gas, without specifying exact volumes.

Emadi said the agreement with Cnooc would last for at least 25 years.

"We finalized a discussion about the plan for the liquefaction and LNG (in October), and some of the package which is very important, such as the price of the gas, is coming closer, maybe less than one month," Emadi said.

When contacted by Dow Jones Newswires, Jashnsaz declined to confirm or deny that the development plan for North Pars has been agreed with Cnooc and signed.

Cnooc's media relations manager, who declined to be named, said he wasn't aware of the agreement with NIOC.

Analysts are skeptical that Iran will be able to secure liquefaction technology to meet its contractual commitments.

It has so far struggled to seal agreements on its natural gas reserves with foreign investors because of spiraling costs and U.S. sanctions.

Cnooc -- the state-owned parent of Hong Kong-listed Cnooc Ltd. -- doesn't have its own proprietary liquefaction technology. However, it has been investing heavily in LNG with a string of regasification terminals being built along China's southern and eastern coast.

The deal Cnooc planned to sign in February envisaged 10 million metric tons of LNG exported annually from North Pars to China - enough to feed three terminals. China, the world's second-largest energy consumer, wants to increase LNG imports to lower its reliance on coal and crude oil.

The North Pars gas field, located 85 kilometers north of the giant South Pars gas field in the Gulf, contains about 80 trillion cubic feet of gas reserves and each of the four development phases may produce as much as 1.2 billion cubic feet a day of gas.

Iran has the world's second-biggest crude reserves after Saudi Arabia and the second-largest gas reserves after Russia.

Cnooc's agreement with Iran continues a trend of Chinese companies expanding their foothold in the Middle East.

The chairman of China National Petroleum Corp. has formally signed the final copy of a $3-billion oil service contract with the Iraqi oil ministry to develop the Ahdab oil field in central Iraq, a ministry official said Tuesday.

CNPC is currently active in Iran in upgrading the veteran Masjed-I-Suleyman oil field under a technical service contract.

In December, China Petroleum & Chemical Corp., or Sinopec, signed a deal to develop Iran's major Yadavaran oil field.

Copyright (c) 2008 Dow Jones & Company, Inc.

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