Iran Oil Min: Deal With Sinopec for Yadavaran Due in Weeks

RIYADH May 02, 2007 (Dow Jones Newswires)

Iran's oil minister said Wednesday that a deal for China Petrochemical Corp., or Sinopec Group, to invest in the Yadavaran oil field in Iran is likely to be completed in the coming weeks.

The only remaining issue in the way of the deal is the rate of return that Sinopec will get on its investment, Kzaem Vaziri Hamaenh said through an interpreter.

"We've had a lot of discussions, the last two rounds were conducted in Beijing, and we are expecting a delegation to come to Tehran to conclude the deal," Vaziri said.

However, the minister declined to specify the rate of return that Iran is offering Sinopec, due to contract confidentiality. Iran is China's third-largest oil supplier after Saudi Arabia and Angola.

The president of state-run Sinopec, China's second largest oil company by assets, said last month that the company wants to provide engineering services to the Yadavaran oil field, but isn't looking for an equity stake. If the contract is confirmed, Sinopec Group will be able to share profits from the Yadavaran field after it begins production, Chen Tonghai said.

Rivals China National Offshore Oil Corp., known as Cnooc, and China National Petroleum Corp., or CNPC, have also been actively seeking gas resources in Iran as they draft plans to build 10 liquefied natural gas receiving terminals on the eastern coast of China over the next five to 10 years.

Cnooc, China's third-largest oil company by assets, said in December that it was in talks with Iran on developing the Northern Pars natural gas field.

Chinese oil firms aren't alone in targeting Iran's natural gas reserves, which are the second-largest in the world after Russia. French energy giant Total S.A. (TOT), Royal Dutch Shell PLC (RDSA) and Spain's Repsol YPF S.A. (REP) also have interests in the country's energy sector.

Shell has also shown an interest in Yadavaran despite pressure from the U.S. to curtail business activities with Iran due to the Islamic Republic's refusal to abandon its nuclear program.

"I think they (Shell) have come to an understanding to become partners and we will welcome this partnership between Sinopec and Shell," Vaziri said on the sidelines of the 2nd Asian ministerial energy roundtable in Riyadh.

Iran and China signed a memorandum of understanding in 2004 in which Iran would allow Sinopec Group to develop Iran's Yadavaran oil field in exchange for an agreement to buy 10 million metric tons of Iranian LNG a year for 25 years. The minister also confirmed recent reports that Total's plans for the South Pars gas field had been rebuffed due to differences over price, and said the French company was now reconsidering its proposal.

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