Iranian oil officials are in Beijing this week to discuss oil sales and Chinese investments in Iran, just days after Tehran and world powers reached a framework nuclear deal, and with the OPEC nation's oil minister due to arrive on Thursday.
Oil Minister Bijan Namdar Zanganeh is set to make his first trip to Beijing since joining the then new government two years ago, one Iranian oil official and a senior Chinese industry official told Reuters.
China, Iran's largest trade partner and oil client, has bought roughly half of Iran's total crude exports since sanctions against Iran were tightened in 2012. Iran, the world's fifth-largest producer, hopes to boost its exports by as much as one million barrels per day (bpd) in just two months once sanctions against it are lifted, although analysts say it will take longer.
Ahead of Zanganeh's visit, Amir-Hossein Zamaninia, Iran's deputy oil minister for commerce and international affairs said that he and his colleagues would discuss China's oil and gas projects in Iran. Officials from state-run National Iranian Oil Company (NIOC) will meet with China's biggest crude buyers.
The NIOC and other officials are expected to meet with regular customers Unipec, the trading arm of top Asian refiner Sinopec Corp, and state trader Zhuhai Zhenrong Corp, which started taking Iranian crude in the mid-1990's when Tehran sought to repay arms purchases with oil.
"It depends first on the willingness of the Chinese for buying Iranian crude, then everything goes through commercial negotiations," said Mohsen Ghamsari, NIOC director of international affairs, of any increase in China's purchases. Iran was China's sixth-largest crude oil supplier last year, behind Saudi Arabia, Angola and others, with sales up 28 percent from 2013 to 27.46 million tons, or about 550,000 bpd, according to Chinese customs data.
A new condensate deal between Zhuhai Zhenrong and NIOC is set to lift China's total crude oil contract volumes to above 600,000 bpd later this year. Chinese energy companies are also big investors in Iran's oil sector, and Iran has been modifying the terms it offers on development contracts to counter worries caused by sanctions and low crude prices.
Chinese energy giants China National Petroleum Corporation (CNPC), Sinopec Group and China National Offshore Oil Corporation (CNOOC) have already inked preliminary pacts with Iran on development projects worth tens of billions of dollars, mostly under the presidency of Mahmoud Ahmadinejad.
Blocked Revenues
Iran also has stored a sizeable amount of cash in at least one Chinese bank, the Bank of Kunlun, because US sanctions have choked the flow of funds. The deputy oil minister said the officials are not in China to resolve the money issue. "The money question will not be resolved unless the sanctions are lifted," said Zamaninia. "China has a number of big projects in Iran, and we're going to polish and resolve questions about those projects," Zamaninia said on the delegation's visit to Beijing.
Zanganeh has also met with Western oil executives at recent OPEC meetings in Vienna, including Italy's Eni, Royal Dutch Shell and Austrian oil and gas group OMV.
China's investments in Iran include projects such as the $4.7 billion phase 11 development of the giant offshore South Pars gas field, which CNPC pulled out of in July 2012, and the North Azadegan and Yadvaran oilfields. The delegation's visit was initiated at the invitation of China's top energy authority the National Energy Administration.
Brent crude prices fell almost $1 a barrel on Tuesday, amid the Iranian delegation's visit to Beijing which might result in more crude flowing into an already swollen market. Brent May crude LCOc1 had dropped almost $1 to $57.26 a barrel. US May crude CLc1 was down 50 cents at $51.64 a barrel.
Tehran and world powers reached a framework nuclear agreement on Thursday last week, with details still to be worked out on how sanctions would be phased out in exchange for reductions in uranium enrichment.
