Stricter Conditions set for Sinopec

Stricter Conditions  set for SinopecStricter Conditions  set for Sinopec

After dismissing China National Petroleum Corporation (CNPC) from the joint South Azadegan oil field due to poor performance, the National Iranian Oil Company (NIOC) has now imposed stringent conditions to extend Sinopec's contract for development of phase two of Yadavaran project.

Any agreement on further development of Yadavaran joint oil field by Sinopec, is contingent on the oil ministry's approval, the chief operating officer of Yadavaran oil field development project was quoted by Mehr news agency as saying.

Having drilled 55 wells of Yadavaran oil field, Sinopec's main work to develop the first phase is near completion. However, the first phase was to be completed a year ago, according to the contract.

As regards the first phase, the Chinese contractor has provided almost 95 percent of the investment required for the project, Hadi Nazarpour said, adding that the company is expected to allocate the balance in 2015.

"Approval of the funding in 2015, evaluation of performance and delays, deadline for completion of the first phase, and health, safety and the environment (HSE) concerns are among issues to be negotiated with the contractor," Nazarpour said.

The objective of Yadavaran project was to produce 85,000 barrels of crude oil per day (bpd) in the first phase, which has not been fulfilled yet.

It is expected to produce 300,000 bpd after completion of the three phases.

The NIOC officially criticized Sinopec's performance last winter, six years after the $2.5 billion contract for development of Yadavaran was signed.

The project, awarded to Sinopec in 2007, is considered a priority because the Yadavaran field straddles a border with Iraq, which is already advanced in developing its side of the reservoir.

The field is estimated to have reserves of up to 17 billion barrels of oil, with 3 billion barrels considered to be recoverable.

Managing director of Petroleum Engineering and Development Company (PEDEC), Abdolreza Haji Hosseinnejad, said in April: "The second phase of Yadavaran oilfield may be developed by Iranian companies, since it is possible now to obtain the necessary credit for development of the second phase through domestic resources."

However, Ali Majedi, former deputy oil minister, said in an interview with the Wall Street Journal, in May: "The company's progress in the field meant it was likely to keep its project. It is quite possible we will continue with the same company for the second phase of Yadavaran. We are quite satisfied with their work."

In late April, Iran also canceled a $2.5 billion deal with state-owned CNPC following repeated delays at the giant Azadegan joint oil-field project.