Close to deal: CNPC makes Azadegan plans
CNPC plans Azadegan drilling
China National Petroleum Corporation (CNPC) plans to start drilling in Iran's huge North Azadegan oilfield next year after a $2 billion deal, under which the company struck "attractive terms”, according to sources.
CNPC, parent of PetroChina , is waiting for Tehran's final greenlight for a deal agreed in January with National Iranian Oil Company (NIOC) to establish 75,000 barrels per day of oil production in four years to develop first phase of North Azadegan field.
State-run Chinese oil companies, including top refiner Sinopec Group and offshore specialist CNOOC, have each clinched oil and gas deals with Tehran.
But companies have yet to plough in big investment, as they have long complained Iran's buyback terms are not generous enough for oil contracts, while multi-billion-dolloar natural gas pacts are constrained by access to often US-patented technology amid Iran's standoff with western powers over its nuclear ambitions.
"It took other Chinese state oil companies eight to nine months to get the Iranian government's approval after signing agreement with Iranian oil companies. The official approval for CNPC should be issued in the coming few months," said the source to Reuters.
The Azadegan deal came just months before a $4.7 billon deal CNPC signed last week with NIOC to develop phase 11 of South Pars gas field, as reported by Iranian state media.
Under the north Azadegan deal with a tenure of 12 years, CNPC is committed to use 48 months to equip the oilfield with full operating facilities with the capacity of 75,000 barrels per day.
The source said CNPC will get a three-pronged package as a return for its investment in North Azadegan: reimbursement of investment in the form of cash or oil and gas productions, which should not exceed 40% to 50% of the total production of the field.
CNPC will also get interest compensation for the total investment calculated at Libor benchmark rate plus a certain points, plus a comparatively fixed investment return fees, said the source.
"These terms are very attractive," the source said, adding that the two sides will talk about the second phase of investment also.
CNPC is also very interested in the South Azadegan oilfield, which the Iranian government seems more inclined to develop on its own, the source said.
Several Western energy company’s have put projects in Iran on hold or scrapped them due to US and UN sanctions but Asian companies, particularly from energy-hungry China and India, have been pursuing deals.
China is the second-largest buyer of Iran's oil with imports near half a million barrels in the first four months of 2009.
Iran is China's second-largest crude supplier.