Renewed Call for Using Domestic Gas Capacity

EghtesadOnline: The equipment needed in South Pars Phase 11 offshore venture, which is expected to be developed by China National Petroleum Corp and Iran’s state-owned firm Petropars, will cost $2.8 billion, chairman of the board of directors of Iranian Petroleum Industries Equipment Manufacturers Association said. "As per the deal, contractors are obliged to meet 51% of their requirements from domestic manufacturers before relying on foreign suppliers," Reza Padidar was also quoted as saying by ILNA on Saturday.

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02 September 2018

According to the official, France's Total had finalized a deal in 2016 worth $4.8 billion to develop one of the least developed ventures among 24 phases of South Pars in the Persian Gulf. However, it abandoned it in the wake of the US unilateral withdrawal from Iran's nuclear deal in May and threats to reimpose sanctions.

"Iranian firms have the capacity to provide up to 70% of the equipment needed by the project," he said, adding that Total had vetted the competence of 80 domestic enterprises to develop the initiative and CNPC is expected to follow the same policy, though it may reassess the quality of some firms.

Padidar noted that Chinese oil and gas giants have never been interested in utilizing Iranian products in completing their ventures, that is why they ought to be obliged legally to comply with the terms of the contract. The official believes that the venture can create direct or indirect jobs for up to 100,000 people through 2021, when SP Phase 11 is scheduled to be completed, according to Financial Tribune.

Stressing that subcontracts will be confidential, the official said Italian oil and gas company Eni and Pergas Consortium, a group of international energy firms, have held negotiations with domestic manufacturers on providing equipment for exploration and production projects in Iran.  Asked about domestic potential, he said, "Local manufacturers are capable of building electrical equipment and valves, as well as some of the 10 strategic goods defined by the ministry for indigenization."

Golden Opportunity

According to Zhang Jianhua, PetroChina's president, CNPC faces a golden opportunity to take control of the Iranian gas field project following the French energy group Total's announcement to pull out. However, the Chinese company does not seem confident enough to ignore the US sanctions and launch the deal immediately.

CNPC is PetroChina's oil and gas trading arm. Asked whether the firm will take over the operation of South Pars 11 offshore project, Zhang did not address the question at a news conference.

"We do not have business in sensitive regions," he said.

Total's withdrawal has opened the chance to take control over part of the vast gas field, located on the Iranian side of the Persian Gulf bordering Qatar. The offshore venture will be developed in two phases.  The first phase, at an estimated cost of $2 billion, will consist of 30 wells and two wellhead platforms connected to onshore treatment facilities by two subsea pipelines.

"The second phase will commence in three to four years," Gholamreza Manouchehri, the deputy for development and engineering at the National Iranian Oil Company, added.

"Total has spent $90 million to help develop the offshore field's Phase 11 and will not be compensated before production begins."

Manouchehri added that in case CNPC takes over Total's stake, the latter's expenditure on the project will be paid by the first. Designed to produce 56 million cubic meters of natural gas per day, SP Phase 11 is expected to come on stream by early 2021.