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UpstreamOnline: CNPC to double Iran budget

By Upstream staff

China National Petroleum Corporation (CNPC) will double its spending on an ageing Iranian oilfield and aims to start drilling this year, an industry official said today.

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 field, an 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 players, 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 per day from Masjed-i-Suleiman, a discovery made nearly a century ago that marked the first commercial find in the Middle East.

CNPC would under the original contract have received a share of oil revenue in the first three years of production, 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,” the official said.

Output from the field, which helped establish Anglo-Persian Oil, 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 US 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 company CNOOC, as well as a similar pact with PetroChina.

However, industry officials expect these projects to take years to finalise as risks remain high.

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.

26 March 2007 07:26 GMT  | last updated: 26 March 2007 07:26 GMT

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