CNPC, Sinopec Urged to Weigh Future Role in Iran

Chinese companies who signed oilfield development contracts with Iran when economic sanctions were in force should renegotiate their place in the country's fast reshaping energy sector, said a deputy at the National Iranian Oil Company.

"The Chinese should participate in oil tenders alongside other international majors," Gholamreza Manouchehri, NIOC deputy for engineering and planning affairs said, IRNA reported.

State-run China National Petroleum Corporation was handed the first development phase of North and South Azadegan oilfields. It was booted out of South Azadegan in 2014 after repeated delays in fulfilling its contractual obligations, although it has reportedly fared better in the North project.

Sinopec also developed the first phase of Yadavaran Oilfield during the sanctions. Both companies opened talks on taking over the second development phases of Yadavaran and Azadegan projects after sanctions were removed in January.

"CNPC is keen to maintain its role in North Azadegan, but we have made it clear that they should participate in new tenders to continue their cooperation with Iran," Manouchehri said. "We have also discussed the Yadavaran project with Sinopec and the field is planned to be tendered soon."

He went on to say that "the Chinese eventually came to terms" with the prospect of holding international tenders for the giant oilfields in the oil-rich Khuzestan Province which approximately hold a total of 50 billion barrels of crude oil in place.

The decision marks a setback for the Chinese majors who reportedly sought a more compromising stance from Iran.

There were speculations that the Chinese majors may maintain their role in the second development phase of North Azadegan and Yadavaran oilfields based on their initial contracts to develop the two fields.

But according to IRNA, the contracts allow NIOC to open talks with other companies over developing the oilfields should the two sides fail in reaching an understanding on the second phases of Azadegan and Yadavaran projects.

  Development of Joint Fields

Azadegan and Yadavaran oilfields, which are divided into the north and south sections, are part of Iran's joint fields with Iraq in the West Karun block -- an oil-rich region south of Khuzestan.

The government in Tehran has prioritized the development of joint oilfields with Iraq. The Arab neighbor has shored up crude production from around 2.5 million barrels a day in 2011 to more than 4.5 million bpd, displacing Iran as the second-largest producer of the Organization of Petroleum Exporting Countries. Last month, President Hassan Rouhani officially launched the first development phases of three oilfields, namely Azadegan, Yadavaran and Yaran.

Iran had set a production target of 85,000 barrel-per-day for Yadavaran's first phase, but output from the shared field beat the target to reach 115,000 bpd. The North Azadegan and North Yaran oilfields have met their respective output targets of 75,000 bpd and 30,000 barrels a day.