China’s CNPC halts Iran gas investment under U.S. pressure

State-controlled China National Petroleum Corporation (CNPC) has suspended investment in the giant South Pars gas field in Iran, following pressure from the United States and in an attempt to steer clear of U.S.-China tensions amid the ongoing trade talks, Reuters reported last week, quoting three Chinese state oil executives.

“China sees the relationship with the U.S. as paramount over anything else. As a state-owned entity CNPC will stay clear of bringing any unwanted trouble into this relationship as the U.S. China trade talks are under way,” an official familiar with CNPC’s global strategy told Reuters.

CNPC is replacing French oil and gas major Total in Iran’s multi-billion-dollar South Pars gas project, Iran’s Oil Minister Bijan Zanganeh said in November.

Last year, Total became the first super major to return to Iran after the previous sanctions were lifted. But after the U.S. withdrawal from the Iran nuclear deal, Total said in May that it would not be in a position to continue the South Pars 11 gas project and would have to unwind all related operations before November 4, 2018.

Before Total quit Iran, the French company had 50.1 per cent in the project and was its operator, while CNPC owned 30 per cent, and Petropars, a wholly owned subsidiary of the National Iranian Oil Company (NIOC), held the remaining 19.9 per cent.

A suspension of the CNPC investment would be a blow to Iran, which had hoped to continue the South Pars 11 project with Chinese participation instead of French investment.

According to Reuters’, although CNPC has agreed to suspend the South Pars investment, it has managed to convince U.S. officials – with whom the Chinese company held four rounds of talks in recent months – that CNPC should continue to invest in the oil fields North Azadegan and Masjid-i-Suleiman (MIS) to recover billions of dollars spent under contracts signed years ago.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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