Iran seeks to sign key oil deal with China
(Reuters)
Updated: 2005-12-19 07:08

Iran hopes to sign a major oilfield deal with China's Sinopec by the end of January, Deputy Oil Minister Mohammad Hadi Nejad-Hosseinian told the oil ministry Web site on Saturday.

If China does sign a deal, it could revive Iran's moribund oil industry that has been stagnant for nearly four months while President Mahmoud Ahmadinejad tussled with parliamentarians over his choices for oil minister.

But the deal could draw fire from the United States. Washington has already penalized Chinese firms for working in Iran, which it accuses of seeking nuclear arms and funding anti-Israeli militia. Tehran denies the charges.

Iran is looking to export liquefied natural gas (LNG) to China for some 30 years when its exports of the supercooled fuel hit world markets in 2009. The overall value of such a contract is estimated at more than $70 billion.

In return, China would take a large upstream stake in the giant Yadavaran oilfield in southern Iran.

Iran signed a Memorandum of Understanding on such a deal in October 2004, but Nejad-Hosseinian said he hoped all the details of a proper contract could be finalized by January.

"Experts will present a report on Tuesday to high-level decision-makers," Nejad-Hosseinian said. "A final contract could be finalized by the end of January 2006."

He said one of the main negotiating areas would be the output expected from Yadavaran.

"Iran estimated the production capacity at 300,000 barrels per day (bpd) but the Chinese have pledged their readiness to extract 180,000 bpd," he said.

"Sinopec has said it could produce 300,000 bpd if well tests show that is possible after 180,000 bpd is reached."

Other complications included the length of the concession of the oilfield and pricing.

Signing big upstream investment deals is crucial for the world's fourth biggest crude producer as output capacity is dropping at an alarming rate.

Previous oil minister Bijan Zanganeh said in July Iran's oilfields were depleting by up to 400,000 bpd each year.