Iran, China set up working groups to speed oil/LNG/petchem pacts

Singapore (Platts)--22Dec2005

Iran and China have set up three joint working groups to speed up the
implementation of oil, LNG and petrochemical agreements signed previously, the
official Islamic Republic News Agency reported late Wednesday.
     The groups would discuss and try to reach a final agreement on the
modalities of expanding the Yadavaran oil field, the transfer of LNG and
petrochemical issues, said Iran's deputy oil minister for international
affairs Hadi Nejad-Hosseinian, as reported by IRNA. 
     "With regard to these working groups on the Yadavaran oil field, the
Chinese side is expected to send a revised version of their 'comprehensive
plan on the field's expansion' and their comments on the preliminary agreement
reached this month," IRNA quoted Nejad-Hosseinian as saying after high-level
discussions held Tuesday. The two sides also met last Saturday.
     The talks involve a memorandum of understanding signed in October 2004
with Chinese refiner Sinopec and cover Chinese purchases of Iranian LNG and
crude oil. Under the MoU, Sinopec is to purchase up to a cumulative 250-mil mt
of Iranian LNG over a 30-year period, starting with 2-mil mt in 2009, rising
to 10-mil mt by 2010 and staying at that level for the life of the contract. 
The Iranians also offered a stake in Yadavaran to Sinopec, which was given the
right to purchase 150,000 b/d of Yadavaran output once peak output is
achieved. 
     The Chinese team is expected to report its conclusions to China's
planning and reform commission, and an expert Iranian delegation will present
its own assessment to the Chinese officials concerned whenever necessary so
the two sides can reach an acceptable solution, Nejad-Hosseinian said as
reported by IRNA.
     The Chinese side would send a negotiating team to Iran early next month
to finalize the agreement, he added. 
      Nejad-Hosseinian had said after last Saturday's meeting that some of
the "snags" in the negotiations have been removed. The talks held in Tehran
included terms for Chinese participation in the giant Yadaveran oil field
under a modified "buy-back" formula. Iran uses buy-backs to bypass a ban on
production sharing deals, repaying investors with proceeds from the completed
project. An agreement could be reached in January 2006 after changes to the
buy-back formula were agreed, including extending the life of the contract,
Nejad-Hosseinian said last Saturday.  
     If agreement is reached, the deal would mark one of the largest single
contracts for Iran, OPEC's second biggest oil producer after Saudi Arabia and
holder of the second largest gas reserves in the world after Russia.
     On the subject of petrochemicals, China, which has vast experience in
implementing polyethylene projects, is to send the results of a feasibility
study to Iran's petrochemical sector. If favorably reviewed, China would be
invited to attend petrochemical tenders in Iran, Nejad-Hosseinian said. The
two sides also pledged to undertake more studies on the possibiility of
petrochemical joint ventures in Iran and China. 
- KimFeng Wong, kim_f_wong@platts.com

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