Chinese energy giant China National Petroleum Corp (CNPC) signed a contract with Iran as one of the partners to develop a natural gas field in the country, which has significant meaning for future cooperation in the energy sector, experts said on Tuesday.
Iranian government-owned National Iranian Oil Co (NIOC) and China's State-owned CNPC, France's Total and Iran's Petropars signed the $4.8 billion deal on Monday to develop Phase 11 of the South Pars gas field, the world's largest gas field, which is located in the Persian Gulf, according to a statement NIOC posted on its website on Monday.
The contract will be carried out in two phases over 20 years. Total will operate the project with a 50.1 percent stake alongside CNPC with 30 percent and Petropars with 19.9 percent, NIOC said.
The deal is the first and biggest deal since UN sanctions on Iran were eased in 2016, said NIOC.
This is the first time that China has cooperated with international capital to develop a gas field in Iran, which is significant, Zhou Rong, a senior research fellow of the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Tuesday.
Zhou said that the project will encourage more Chinese companies to cooperate with Iran in the energy sector, noting that the three countries will share the interests and risks.
"Iran chose to cooperate with CNPC as the Chinese company has long-term cooperation arrangements with Iran, and its technology and financial background are trusted there," Lin Boqiang, director for the China Center for Energy Economics Research at Xiamen University, told the Global Times on Tuesday.
CNPC is seeking opportunities in the gas field as it looks for new drivers. The company saw a profit decline in 2016, said Lin.
The expert also noted that the deal with Iran is a good business opportunity that may benefit CNPC's gas business.
Iran has the world's second-largest natural gas reserves and fourth-largest oil reserves, according to a CNBC report on Monday that cited the US Energy Information Administration.
"Meanwhile, the deal has a significant meaning for Iran," Lin said.
Iran's economy was affected by the sanctions, Lin said, noting that Iran hopes to attract more investment to develop its oil and gas resources.
Both CNPC and Total are global energy giants, and their cooperation in the South Pars area could encourage other oil companies to join the development, noted Lin.
Iranian Minister of Petroleum Bijan Zangeneh also said that the deal is a signal that European and Asian companies are returning to Iran, according to NIOC on Tuesday.
CNPC and Total were not available to comment on the deal.
But the companies need to prepare for any risks including the tense relationship between Iran and the US as well as regional geopolitical risks, Lin said.
"If the US imposes sanctions on Iran, it's questionable whether France will stand on the same side as China. It's crucial that China and France keep a stable relationship on the project," said Zhou.
The deal won't do much to change global energy distribution, Li Zhoulei, a crude oil and petrochemical analyst at Shanghai-based Everbright Futures, told the Global Times on Tuesday.
Zhou agreed. The project will not have an immediate impact on the global energy sector, as Iran now doesn't export natural gas.
Total will provide an initial $1 billion for the first stage of the project. The first stage of the project will cost about $2 billion and have 30 wells and two well-head platforms connected to existing onshore treatment facilities, according to NIOC.
The project is predicted to pump 50.9 million cubic meters of gas each day.
Other international energy companies also have ambitions in the Iranian market. Royal Dutch Shell and Russian oil companies including Gazprom PJSC all signed initial agreements with Iran in 2016 to develop oil fields, according to media reports.
