Iran's state-owned oil company NIOC is in discussions with China's Sinopec about participating in a second phase of development at the giant 30bn bl Yadavaran oil field in southwest Iran on the border with Iraq.
NIOC's director of investment Fereydoun Kord-Zanganeh said talks with Sinopec to finalise a $3bn deal for the project have been going on for more than a year. Yadavaran is one of five fields — along with North Azadegan, South Azadegan, North Yaran and South Yaran — that make up the West Karun cluster, which Iran has long targeted as a key part of its plans to boost crude production capacity.
Sinopec was the operator of the first phase of development at Yadavaran, after being awarded a service contract by NIOC in 2007. The contract called on Sinopec to raise production to a phase 1 plateau of 85,000 b/d by 2010-11 and add a further 100,000 b/d by 2015. But the Chinese firm fell well behind its targets, with production lagging at just 50,000 b/d by 2014. This prompted repeated warnings from NIOC to speed up work at the field. Sinopec eventually reached the phase 1 plateau target by 2016 and raised production further to 105,000 b/d 2017.
The original contract signed with Sinopec covered a second phase of development. But the deal was terminated quietly in 2019 without any formal explanation. NIOC subsequently reclaimed operatorship and raised production at Yadavaran to 120,000 b/d by 2020. Output has since held at around that level.
Despite the issues, Kord-Zanganeh says Sinopec remains very much in the frame to secure the contract for the second phase. Talks with the company began before the current Iranian government took office in 2021, but Iran's former oil minister Bijan Namdar Zanganeh "stopped the negotiations", he said.
Opportunity for progress
For its part, Sinopec has not made any public comments regarding its participation in the project — in line with its cautious approach towards Iranian investments since the US pulled out of the Iran nuclear deal, known formally as the Joint Comprehensive Plan of Action (JCPOA), in 2018 and reimposed sanctions on Tehran.
More than a year of indirect discussions between Tehran and Washington aimed at reviving the JCPOA have yet to bear fruit, so the US sanctions on Iran remain in place for now. But with Iran's president Ebrahim Raisi currently in Beijing on a state visit, accompanied by oil minister Javad Owji, there will be ample opportunity for further discussions on Yadavaran phase 2 and other oil and gas projects that Iran has on offer for foreign investment.
Iranian officials say a key motive for the state visit is to bolster ties and increase co-operation between the two long-term strategic allies, particularly within the confines of a 25-year strategic deal that the countries signed in Tehran back in March 2021. Iran's foreign minister Hossein Amir-Abdollahian, who is also in Beijing as part of the Iranian delegation, said earlier today that 20 agreements had been signed so far during the visit, covering "various fields, including energy, transportation and transit". Details have yet to be released on any of these deals.
