Sinopec Signs $2 Billion Oil Deal with Iran

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Researched by Industrial Info Resources (Sugar Land, Texas)--China National Petroleum and Chemical Corporation (Sinopec) (Beijing) signed an agreement in December with Iran's Oil Ministry to develop Iran's Yadavaran oil field for $2 billion. Sinopec could also buy liquefied natural gas (LNG) from Iran to stabilize its supply chain.

According to the agreement, Sinopec will be responsible for construction, which is expected to be finished in four years. During that period, which is half of what was mentioned in a memorandum in 2004, Sinopec is expected to complete 45 oil wells, producing 85,000 barrels per day of crude oil after the $2 billion Phase I portion is completed, China's Ministry of Commerce reported. Phase II, which is set to begin three years after Phase I is completed, will allow the oil field to produce an additional 100,000 barrels per day with 137 oil wells.

Sinopec and Iran's Oil Ministry had expressed interest in oil recovery and a 25-year gas purchase in 2004; however, concrete progress has not been made until now, forcing Sinopec to postpone its LNG project in China's Qingdao City. LNG importation, which was an important part in the 2004 memorandum, is not mentioned in the new agreement.

The Yadavaran oil field is in Iran's Khuzestan Province near the Iran-Iraq border. The oil field covers 675 square kilometers with proven reserves of 18 billion barrels. It is one of the world's biggest unexploited oil fields.

The deal was signed in Tehran by Zhou Baixiu, the head of Sinopec's international division, and Iran's Deputy Oil Minister Hossein Noghrehkar Shirazi. Sinopec had originally asked for 15% of return from its investment, but Iran's Oil Minister Gholam Hossein Nozari said the amount had been finalized at 14.98%, and the United Kingdom's Financial Times said the pact demands that Sinopec give 51% of subcontracts to Iranian companies.

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