CNPC Takes Over South Pars Phase 11
Iran’s oil minister, Bijan Namdar Zanganeh, announced November 25 that Chinese state-owned producer, CNPC, has officially taken over French Total’s 50.1% share in the South Pars phase 11 (SP11) project.
Zanganeh told the Iranian parliament’s official website that negotiations with CNPC over starting the project are ongoing, and as yet no date has been set for work to begin.
Total had not responded to NGW at the time of writing, but already said that it was not going to oppose the transfer of its SP11 stake. Following the US withdrawal from the Iran nuclear deal, Total said on May 16 it would pull out of SP11 in the absence of a waiver from the US. To date, Total has spent €40mn on the project; on studies and preparing tenders for subcontractors. This will be returned to Total, but only after completion of the project, and with no additional profit.
CNPC already held a 30% share in the SP11 project as part of a 2017 agreement, and therefore now holds 80.1%. The remaining 19.9% stake belongs to PetroPars, a subsidiary of Iranian state producer NIOC.
CNPC has also been developing Iran’s giant North Azadegan oil field since last decade and production is now at 78,000 b/d. However, according to an official document seen by NGW, this year the Chinese company has dramatically scaled back its funding for the project. Reuters news agency also reported earlier that CNPC stopped buying oil from Iran in November because of US sanctions. The US, however, gave China a waiver on November 5 to import 360,000 b/d Iranian oil over the next six months, equivalent to half of last year’s average Chinese imports of Iranian crude.
Total's importance for South Pars phase 11
The South Pars phase 11 project was divided into two phases, of which the first has nameplate capacity of 56mn m3/d (20.4bn m3/yr) and costs $2bn. Iran has the technical capability to undertake the initial phase, relying on domestic technology, and has already developed over 10 phases of South Pars by itself. However, the second phase requires a 20,000-metric ton platform with two or three compressors by 2022, the year before the expected pressure drop, and neither Iran nor CNPC are believed to have any previous experience in this specific area; expected costs are in excess of $2.5bn.
Last year Iran increased its gross gas production (including re-injected or flared gas) by 25bn m³ year-on-year to 285bn m3. This includes 224bn m3 of sales gas, which is up 10.5% year-on-year. Almost all this growth came from the South Pars field, which accounts for 70% of Iran’s total gas production. This year, however, production rose only slightly, as Iran only installed a platform in the South Pars phase 14 (5.1bn m3/yr capacity) in September; with none of the other phases being completed in 2018.
The state-owned National Iranian Gas Company (NIGC) declined to comment to NGW about production levels. A source at the oil ministry told NGW that "after re-imposing US sanctions on the country in May 2018, officials have been banned from releasing any statistics about oil and gas production and exports, for either local or foreign media".
Opec’s latest monthly reports show that Iran, its third largest oil-producing member, has stopped providing data on oil production.