Oil giants sign 3-way deal to ex­ploit gas re­serves in Gulf

China Daily (Hong Kong) - - FRONT PAGE - By JING SHUIYU and ZHENG XIN Con­tact the writ­ers at jing­shuiyu@chi­nadaily.com.cn.

Chi­nese, French and Ira­nian en­ergy giants signed a $4.8 bil­lion deal to de­velop the world’s largest nat­u­ral gas re­serve in the Per­sian Gulf on Mon­day.

The par­ties — China Na­tional Petroleum Corp, France’s To­tal and the Na­tional Ira­nian Oil Co through its Petropars sub­sidiary — will de­velop the South Pars gas field, the first ma­jor en­ergy in­vest­ment since sanc­tions against Iran were lifted early last year. Pro­duc­tion is to be­gin within 40 months, ac­cord­ing to the agree­ment.

The French com­pany will have a 50.1 per­cent in­ter­est, with CNPC own­ing 30 per­cent and Petropars 19.9 per­cent.

As China’s big­gest oil and gas pro­ducer, CNPC “can pro­vide ex­pe­ri­ence in gas de­vel­op­ment, needed in­vest­ment and ac­cess to the Chi­nese mar­ket for this project”, said Wang Lu, an an­a­lyst from Bloomberg In­tel­li­gence.

The in­vest­ment could fur­ther di­ver­sify China’s im­port sources and se­cure the coun­try’s nat­u­ral gas sup­ply, he said.

China aims to raise the share of gas in pri­mary en­ergy con­sump­tion to a range of 8.3 to 10 per­cent in 2020, from 5.9 per­cent in 2015, Wang said. He added that China will rely more on gas im­ports to achieve the tar­get.

CNPC said it was fi­nal­iz­ing de­tails with the Ira­nian side.

Iran’s Petroleum Min­is­ter Bi­jan Nam­dar Zan­ganeh said the coun­try’s oil in­dus­try needs some $200 bil­lion in in­vest­ment over the next five years. The coun­try, with its 33.5 tril­lion cu­bic me­ters of proven re­serves, ranks first in the world, ac­cord­ing to BP.

Ac­cord­ing to the In­ter­na­tional En­ergy Agency, the South Pars field holds an es­ti­mated 51 tril­lion cu­bic me­ters of gas. It ac­counts for ap­prox­i­mately 19 per­cent of the world’s to­tal gas re­serve.

“Iran’s crude oil sup­plies to China have re­mained con­sis­tent and fairly sta­ble,” said Oceana Zhou, an an­a­lyst at S&P Global Platts.

With the new deal, China and Iran are ex­pected to fur- ther en­hance co­op­er­a­tion in the en­ergy sec­tor, Zhou said. “This is a mu­tu­ally ben­e­fi­cial re­la­tion­ship, as Iran needs in­ter­na­tional part­ners to de­velop both its up­stream and re­fin­ing sec­tor.”

Chal­lenges also ex­ist, in­clud­ing “geopo­lit­i­cal risks and cur­rency in­sta­bil­ity”, said Liang Jin, man­ager of nat­u­ral gas depart­ment at Bei­jing-based JLC Net­work Tech­nol­ogy Co.

“Off­shore in­vest­ments are of­ten ex­posed to these chal­lenges, es­pe­cially in Iran. But the transcon­ti­nen­tal col­lab­o­ra­tion will, to some ex­tent, lower project risks and present an ir­re­sistible op­por­tu­nity for all par­ties,” she said.

Asked the rea­sons be­hind Chi­nese en­ergy giants’ over- seas ex­pan­sion, Zhou said: “They are in­vest­ing in for­eign up­stream projects with the aim of es­tab­lish­ing them­selves as in­ter­na­tional com­pa­nies and up­grad­ing their pro­files. En­ergy se­cu­rity con­cerns are weaker now with the am­ple avail­abil­ity of oil and ac­cess to re­sources.”

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