China firms squander assets in trade with Iran

Chinese energy firms were definitely the biggest beneficiaries of anti-Iran sanctions, allowing them to easily win some of the major oil and gas projects but the companies have easily squandered their best opportunities. 

Almost all the projects awarded to the Chinese are beset by either repeated delays or other contractual problems, resulting in huge losses for Iran.

Tehran has had to cancel at least two major oil and gas contracts with the Chinese companies and extent deadlines for initial production from two oilfields shared with Iraq several times.

Chinese energy companies were reportedly instructed in 2010 to slow or stop work in Iran because of pressures from the US which has a sanctions regime in place against Tehran.

State-run Sinopec Group and China National Petroleum Corp (CNPC) are reported to begin producing 160,000 barrels a day of oil from two giant fields in southwestern Iran from October.

Sinopec officials have said they expect the first phase of the Yadavaran oilfield to yield 85,000 bpd.

Yadavaran, which Iran shares with Iraq’s Sinbad, was awarded to Sinopec about nine years ago in a $2 billion deal to operate the first phase in July 2014 and raise recovery to 200,000 bpd in the second phase.

According to the ISNA news agency, the Iranian government has agreed to inject another $1.6 billion to the project so that the funds allocated to the first phase have surpassed $3.6 billion so far.

With the Chinese officials promising the first output around October, the project will come on stream after a 17-month delay, translating into $2.7 billion in lost revenues.

Chinese workers at the North Azadegan project in southwest Iran.

CNPC is also reported to begin phase one of North Azadegan around October — more than two years behind schedule. The field is slated to add 75,000 bpd to Iran’s oil production capacity.

China is using the Iranian money from sale of oil to Beijing to fund projects in the Middle Eastern country. According to former central bank governor and economy minister Tahmasb Mazaheri, Iran often faces a myriad of problems to access its own funds in China even as they are not frozen under the sanctions.

In 2013, Iran cancelled a $2.5 billion contract to extract oil from the South Azadegan field and another deal to develop Phase 11 of the South Pars natural gas field after CNPC spent four years just to start the projects.

The Chinese are now said to have accelerated their operations in a bid to appease Iran as they see the specter of being undercut by international energy giants for new projects but it’s apparently too late already.

By Press TV