Beijing: China’s biggest energy firm will double its spending on an ageing Iranian oilfield and aims to start drilling this year, pushing forward one of its few development projects in the world’s fourth-largest oil exporter.
China National Petroleum Corp. (CNPC) recently renegotiated terms with the National Iranian Oil Company and raised its investment to about $150 million to produce oil from the Masjed-i-Suleiman (MIS) field, an industry official familiar with the project told Reuters.
The service contract was initially signed in 2004.
Tehran, under increasing US pressure over its atomic programme, is lining up oil and gas deals with international companies including Chinese state firms, Royal Dutch/Shell and Spain’s Repsol.
Under the revised deal, which has yet to win final approval from the Iranian government, CNPC was expected to produce up to 25,000 barrels of oil a day (bpd) from Masjed-i-Suleiman, a discovery made nearly a century ago which marked the first commercial find in the Middle East.
CNPC, experienced in coaxing more oil from ageing fields, would have received a share of oil revenue in the first three years of production under the original contract, said the official, who declined to elaborate on the changes made to the terms or the number of wells to be sunk.
“The terms are not so attractive despite the changes. Iran wants to see how Chinese technology works and then can learn from us,” said the official.
Output from the field, which helped establish the Anglo-Persian Oil Co, BP’s predecessor, as an industry force, peaked in the 1930s at more than 130,000 bpd before declining to under 50,000 bpd in the 1960s. It is now in its last leg of production life using conventional recovery technology.
China has become the world’s second largest energy user after the United States and is keen to find more reserves.
It signed a string of preliminary deals with Iran last year that included a $16 billion natural gas production and long-term supply deal with China’s third-largest oil firm CNOOC and a similar pact with PetroChina, as reported by Iranian state media.
But industry officials expected these projects would take years to finalise as risks remain high despite Tehran’s recent modifications in contract terms.
Under the new buy-back terms, Iran offers international firms the chance to stay on as service providers for the full cycle of oilfeilds, instead of only a few years under the existing contracts to cover their investment plus a fixed return.
The only other main service deal Chinese won in Iran was a $85 million pact signed in 2000 involving CNPC to drill 19 gas wells in southern part of the country.