China National Petroleum Corp. and an Iranian oil delegation were expected to start negotiations late last month on the joint financing and construction of a crude pipeline in Iran.
The crude for the pipeline will come from oil swap deals with other Caspian countries, such as Kazakhstan. Iran expects the pipeline will help it develop a system to swap crude between central Asian countries and the Middle East.
Iran is looking for capital and construction services to help build the crude oil pipeline from the port of Neka on the Caspian coastline to refineries in northern Iran.
CNPC's major interest in the pipeline is to provide construction services, but it didn't rule out the possibility of acquiring some shares in the project. Any investment may be repaid in the form of crude swaps.
CNPC has provided similar services in Sudan and Kuwait.
Project details
CNPC expects construction to start later this year or early next year, and completion is expected within 2 years of the project's commencement. Construction will take place in two phases. The first phase involves the construction of an 800-km segment, and the second phase involves extending the line to 1,400 km.
The Iranians are also expected to negotiate with other Chinese oil companies, such as China Petrochemical Corp. (Sinopec), as a source of funding for the project.
Sinopec is more likely to buy shares in the company instead of providing construction services, because its focus has largely been in oil refining and marketing, with a small emphasis on upstream operations; it has little pipeline construction expertise.
The pipeline is expected to have an initial throughput of 175,000 b/d, expandable to 370,000 b/d after the construction of the second phase. Total outlay is pegged at $360 million.
Last year, China imported 28.828 million bbl of crude oil from Iran, up 9% from the prior year. The bulk of the Iranian crude is believed to be processed by Sinopec refineries.
Sinopec needs to expand its overseas crude supply base, because it can provide only 30% of its crude needs of 2.2 million b/d.
