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The Wall Street Journal: Beijing’s Gas Ties to Iran Grow

CNPC Is Latest Firm
To Arrange LNG Deal;
U.S. Voices Concerns
January 15, 2007

BEIJING — China is set to deepen its involvement in Iran’s energy sector through a $3.6 billion liquefied natural-gas project led by its biggest oil company, ignoring pressure from the U.S., which opposes all business dealings with the Middle Eastern country.

China National Petroleum Corp., or CNPC, is finalizing a memorandum of understanding with Iran’s oil ministry to invest the sum in developing Iran’s South Pars natural-gas field, a Chinese official familiar with the plans said Friday.

The news came a day after China’s Foreign Ministry warned the U.S. not to meddle in its trade relations with Iran, stating that energy cooperation was legitimate.

U.S. officials fear China’s dealings in Iran, which have seen PetroChina Co. and CNOOC Ltd. negotiate big LNG deals recently, could hurt international efforts to pressure the Islamic republic to abandon its nuclear program.

Susan Stevenson, spokeswoman for the U.S. Embassy in Beijing, said, “Both as a matter of policy and law, the U.S. opposes investment in Iran’s oil and gas sector.”

CNPC intends to spend around $1.8 billion on exploration and production in the SP14 gas block in the South Pars field, and a further $1.8 billion on building a LNG plant, the Chinese official said.

The SP14 block, which is situated in the middle to southern part of the South Pars gas field, has estimated natural-gas reserves of 370 billion cubic meters. According to the plan, 4.5 million tons of LNG can potentially be shipped to China annually from the LNG facility built by CNPC.

Chinese oil companies have been actively seeking gas resources in Iran as they draft plans to build 10 LNG receiving terminals on the eastern coast of China in the next five to 10 years.

PetroChina, which is China’s largest integrated oil firm and a unit of CNPC, has secured a long-term LNG deal from the development of the SP11 block in South Pars, where French titan Total SA has a leading stake. Total is to sell PetroChina a minimum of four million tons of LNG annually for 25-30 years that will be unloaded at the Chinese company’s terminal at Tangshan in northern China.

Sinopec Group, the country’s second-largest oil company by output, is in talks with Iran on a 25-year LNG contract and the development of Iran’s Yadavaran oil field.

But this has worried Washington, which last week raised concern over plans by Cnooc, the listed unit of China National Offshore Oil Corp. and the third-largest listed oil producer in China, to invest $16 billion on developing Iran’s North Pars field and building LNG facilities.

Chinese oil firms aren’t alone in targeting Iran’s natural-gas reserves, which are the second-largest in the world. In addition to Total, other Western oil companies to have invested in the country include Royal Dutch Shell PLC and Spain’s Repsol YPF SA.

Last month, Australia’s Liquefied Natural Gas Ltd. won approval from National Iranian Oil Co. for a gas-supply agreement. A spokesman for Australian Trade Minister Warren Truss noted at the time that Australia has no bilateral sanctions against Iran.

Iran, which has no LNG facilities, has been a net gas importer for years, as a result of lagging investment caused by U.S. sanctions that have slowed development of its gas resources. The country is expected to become a net exporter by 2010, according to the International Energy Agency.

—- Steven Yang in Beijing contributed to this article.

Write to David Winning at [email protected] and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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