Iranian Officials Visiting Beijing to Discuss Post-Sanctions Energy Investments and Strategy
Iranian officials, including Oil Minister Bijan Zanganeh, are in Beijing this week to explore energy development opportunities with China. In the scenario that sanctions relief comes on the timeline (perhaps naively) hoped for by Iranian officials, they are reportedly looking to double their oil exports within two months of the final agreement. Iran‘s oil exports have dropped to just over one million barrels per day (bpd) from a 2012 level of 2.5 million bpd.
Specifically, Iran is currently in talks with the China National Petroleum Company (CNPC) and Sinopec to further develop their existing oil fields. These companies have a long history of large-scale involvement in Iran, despite some modest scaling back of that activity over the past several years. It is not surprising that these entities would be among the first targeted by Tehran for a quick scale-up of activity in a post-sanctions environment.
Sinopec has been continuously working on the Yadavaran oil field since it was awarded a $2 billion contract to develop the field in 2007, the field has a capacity of 110,000 bpd. The current production level of that field is 25,000 bpd, but Iran hopes to reach 75,000 bpd within months of the lifting of sanctions. CNPC has been developing the North Azadegan oil field since 2009 after being awarded a $2 billion contract to do so. It was also contracted to develop the South Azadegan field, but lost that contract over delays. CNPC has also expressed an interest over the past week in returning to the South Pars natural gas field, which it pulled away from 2012 due to difficulty in obtaining the necessary equipment from U.S. and EU companies.
Mohsen Ghamsari, the Director of International Affairs at the National Iranian Oil Company, said that Iran will also seek natural gas liquefaction technology from Western firms as soon as the sanctions are lifted in order to take advantage of CNPC‘s willingness to jump back into this business.
If CNPC succeeds in licensing Western technology in order to take advantage of its stubbornly retained foothold in Iran from prior to ‘‘‘ and throughout ‘‘‘ the sanctions period, it would be an especially unhelpful lesson drawn from the totality of the Iranian sanctions experience (i.e., rewarding CNPC for its recalcitrance throughout this period, while many other countries sacrificed such relationships in order to present a unified and principled front during negotiations and sanctions).