From several directions, US pressure froze a crucial gas development off Iran in the last month of 2018.
China National Petroleum Corp. in December was reported to have suspended investment in 11th-phase development of supergiant South Pars field.
It was unclear whether the state-controlled company acted on its
own or under orders from top levels of the Chinese government, which is embroiled in a trade war with the administration of US President Donald Trump.
Iranian authorities had designated CNPC operator of South Pars 11 in November after the August withdrawal by Total, a response to reinstatement by the US of sanctions against the Islamic Republic.
CNPC’s pullout was reported Dec. 13 by Reuters.
South Pars 11 is one of 24 development phases for the field, 18 of which, according to the US Energy Information Administration, are operational.
The $4.9-billion 11th phase is important for reasons beyond the 2 bcfd of gas and 80,000 b/d of condensate it’s expected to produce.
By signing the contract in July 2017, Total became the first western company to return to Iran after the lifting of sanctions under the Joint Comprehensive Plan of Action, the 2015 agreement addressing Iranian nuclear development from which the US withdrew last May.
The agreement also was the first signed under participation terms redesigned to improve the allure of Iranian oil and gas projects to foreign investors.
More important to Iran about the now-suspended contract, however, is access to technology.
After the completion of two platforms with 12 wells each under the original agreement, a follow-on contract is to cover booster platforms for pressure maintenance in the South Pars 11 and other reservoirs.
If CNPC fully withdraws, the surviving interest holder will be Petropars, a unit of National Iranian Oil Co. probably unable to design and install large pressure-booster platforms on its own.
Petropars’s remaining motive to proceed with South Pars 11 solo probably would be to produce condensate for export.
But US sanctions now cover condensate exports, too.
(From the subscription area of www.ogj.com, posted Dec. 14, 2018. To comment, join the Commentary channel at www.ogj.com/oilandgascommunity.)