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China
Invests $70bn in Iran’s Oil Projects |
Phase 11
of South Pars gas field, which was to be developed by the French Total,
has been given to China’s national oil company.
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China has made extensive
investments in exploration and production of oil and gas in Iran and it seems
that the country is not willing to lose this opportunity for access to secure
oil and gas reserves. By developing its refineries and importing oil from
Iran, China will be able to meet its oil demand. At present, Beijing is
importing 700,000 barrels per day of oil from Iran.
In the absence of Western
companies which have been deprived of Iran’s oil and gas projects due to US
pressures, China has been developing two of the biggest oil fields in Iran and
total investment by China in Iranian oil and gas fields is projected to reach
70 billion dollars in the coming years.
At the same time, some
Iranian authorities announced last year that they sought to increase value of
contracts between Iran and China up to 100 billion dollars. In the past three
years, China has concluded about 30 billion dollars worth of contracts with
Iran to greatly increase its share from Iran’s oil and gas projects. Out of 70
billion dollars of ongoing oil and gas projects in Iran, China accounts for
about half of the figure. At the same time, when Akbar Hashemi Rafsanjani and
Mohammad Khatami were president (that is, up to 2007) European companies
claimed the lion’s share of the Iranian oil and gas industry contracts. Before
election of Mahmoud Ahmadinejad, creditable oil majors like Total, Repsol, ENI,
Japan’s INPEX, and Agip were working on South Pars gas field as well as
southern Iranian oil fields, but in the past three years, political relations
between Iran and the West have made those companies suspend their contracts
and some of them have already left the country.
Now
that India will most probably withdraw from the Peace Pipeline, Chinese
companies have declared their readiness to replace India.
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Subsequent to those
developments, Chinese oil companies moved in on South Pars, North Pars,
Azadegan, Yadavaran, Golshan, and Ferdows fields by signing a total of 30
billion dollars worth of contracts with the Iranian side. Thus, they replaced
creditable oil companies like Total and INPEX in some fields.
Analysts maintain that since
China holds firm grip on the Iranian oil industry by accounting for 50 percent
of relevant contracts, the Iranian oil industry is now greatly dependent on
low quality Chinese technology.
Some experts also maintain
that although Chinese technology is inferior to those of oil majors and
European companies, they can work as good brokers for Iran in order to provide
the country with necessary parts and equipment at a time of tough economic
sanctions and prevent severe slowdown in the implementation of Iran’s oil and
gas projects. Although under the current circumstances, presence of China will
increase final cost of oil and gas development projects, at least, those
projects keep going. Anyway, when delineating the 20-year outlook of Iran’s
oil and gas industries, due attention should be paid to the role of creditable
companies enjoying modern technology and technical know-how because Iran
currently boasts the world’s second biggest oil and gas reserves and ranks
first in the world in term of total oil and gas reserves. Since many major oil
fields in the world are operating at full capacity and European energy markets
are eyeing Iran, Iranian officials should think of appropriate mechanisms to
attract foreign investment and creditable companies. However, they are just
trying to appease Chinese companies and keep them working on Iranian oil and
gas fields.
Phase 11 of South Pars gas
field, which was to be developed by the French Total, has been given to
China’s national oil company.
Also, Azadegan oil field was
to be developed by Japan’s INPEX, but under US pressures, the company failed
to get the agreement of Japanese officials for participation in the project
and was rapidly replaced by a Chinese company. Gas transfer to China is
another area for cooperation between Tehran and Beijing.
Now that India will most
probably withdraw from the Peace Pipeline, Chinese companies have declared
their readiness to replace India. It seems that due to its high bargaining
power and after withdrawal of India, the Red Dragon will be in a better
position to sit at the negotiating table on the Peace Pipeline. |
