News ID: 237529
Published: 0227 GMT January 18, 2019

China offers Iran $3bn oilfield deal despite sanctions

China offers Iran $3bn oilfield deal despite sanctions
BLOOMBERG

US likely to extend Iran oil waivers

State-run Chinese energy giant Sinopec has offered Iran a $3-billion deal on further development of an Iranian oilfield the two countries are already working on, the Wall Street Journalhas reported.

The offer made by the China Petroleum & Chemical Corp (Sinopec) is part of an existing contract to operate the Yadavaran oilfield in southwest Iran on the Iraqi border, the report said.

The Chinese believe the offer wouldn’t violate a US ban on signing new development deals with Iran because the Yadavaran contract goes back to 2007, according to people familiar with the matter.

Sinopec has told its Iranian counterpart, the National Iranian Oil Company (NIOC), it wants its share of the field’s production to be granted under the US waiver allocated to China, one person said.

The new deal was offered by Sinopec in late December 2018 when the US allowed China to keep purchasing as much as 360,000 barrels of Iranian oil a day, the Journal said.

If implemented, the deal offered by China would double production at Yadavaran to more than 200,000 barrels a day (bpd) within six months.

China National Petroleum Corp (CNPC) and Sinopec have invested billions of dollars in Yadavaran and North Azadegan oilfields, according to Press TV.

Yadavaran is one of the world's biggest undeveloped oilfields with reserves of 31 billion barrels of light and heavy crude oil, while North Azadegan is estimated to hold 5.7 billion barrels of reserves.

Yadavaran was launched with a production of up to 115,000 bpd and around $2 billion of investment by Sinopec in November 2016. CNPC brought online the first phase of North Azadegan with 75,000 bpd in early 2017.

The United States gave waivers to eight major clients of Iranian oil – China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey – after restoring energy sanctions in November.

However, Asian buyers of Iranian oil have overcome final hurdles to resuming shipments from the country, with first cargoes set to arrive in Japan as early as this month. 

According to media reports, China took 576,000 barrels per day of Iranian oil in December, while South Korea discharged 300,000 barrels, its first cargo since July.

Oil pricing agency S&P Global Platts quoted presidents of Japan's JXTG Holdings and Cosmo Oil as saying that the refiners will resume loading from Iran at the end of this month.

China and India continued to import Iranian oil from November while Turkey resumed imports in December.

 

Waivers might be extended

REUTERS

The US waiver, issued in November, is for a period of 180 days but American officials are reportedly considering extending it.

On Friday, Reuters said the United States is likely to extend waivers from sanctions on Iranian oil imports in May but will reduce the number of countries receiving them to placate top buyers China and India and to decrease the chance of higher oil prices.

Reducing the number of waivers will limit oil exports from Iran, the fourth-largest producer in OPEC, but the United States is unlikely to meet its earlier target of driving Iranian oil exports to zero.

China, India, Japan, South Korea and Turkey are likely to be given waivers after they expire in May, US-based analysts at Eurasia Group said.

“Other geopolitical priorities will moderate the administration’s desire to halt Iranian exports, particularly with Iran’s top two purchasers, China and India,” the analysts said.

Asia’s Iranian crude imports fell to their lowest in more than five years in November when US sanctions took effect.

China and India continued to import Iranian oil from November while Turkey resumed imports in December.

South Korea is expected to receive condensate from Iran this month after a four-month halt while Japan’s shipments are still pending banks’ approval to process payment to Iran.

However, the United States is unlikely to completely remove Iranian oil from the market because the loss of that supply would probably result in a politically unpalatable increase in oil prices.

“Given (US) President Trump’s public affection for low oil prices, and the difficulty of getting countries like China and India to completely cut back, the White House will likely settle for less than zero next time,” Mike Tran, an analyst at RBC Capital Markets said.

Amos Hochstein, the former international energy envoy who ran Iran sanctions under the Obama administration, said the real reason Trump is giving the waivers is because he is unable to force China and India to stop buying oil from the country.

“There will 100 percent exemptions in May," Hochstein said.

 

 

   
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