State Dep’t Welcomes Chinese Energy Giant’s Exit From Iran Gas Project

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By Patrick Goodenough | October 8, 2019 | 4:41 AM EDT

Facilities of Iran’s South Pars gas field in the Persian Gulf. (Photo by Atta Kenare/AFP/Getty Images)

( – The State Department has welcomed reports that China’s state-owned energy giant has pulled out of a $4.9 billion project to develop an Iranian portion of the world’s biggest natural gas field.

“Chinese company, and more than 100 others, have made the wise decision to stop doing business with Iran,” tweeted department spokeswoman Morgan Ortagus. “It’s not worth exposing your assets to U.S. sanctions.”

China National Petroleum Corporation (CNPC) has yet to formally announce the move, but Iran’s oil minister broke the news on Sunday.

Bijan Namdar Zanganeh said that as a result of the Chinese exit Petropars, a subsidiary of the National Iranian Oil Company (NIOC) and originally a minority stakeholder in the project to develop “phase 11” of the offshore South Pars gas field, would take over and carry out the entire project on its own.

The CNPC withdrawal comes less than two weeks after the Trump administration imposed sanctions on six Chinese shipping companies and parent firms and five Chinese executives for transporting Iranian oil. The State Department described that as the biggest such step since the U.S. restored sanctions on the regime in Tehran after exiting the Iran nuclear deal in May last year.

The Chinese departure is among the most serious blows to the regime’s economy yet resulting from the U.S. “maximum pressure” sanctions campaign, which has led to crude oil exports being reduced by more than 80 percent.

Fourteen months ago the other major partner in the South Pars phase 11 project, France’s Total, withdrew, despite having already sunk $45.7 million into the scheme, after its efforts to secure a sanctions waiver from the Trump administration failed.

Total, then the majority shareholder, had unsuccessfully sought an exemption from the U.S. Treasury Department’s secondary sanctions – measures that penalize foreign companies that deal with Iran by limiting their participation in the U.S. financial system.

The French energy giant had had a 50.1 percent stake in the project, and when it pulled out, Iran said that CNPC – the world’s third-largest oil company – would pick up its share of the contract, increasing its stake from 30 percent to more than 80 percent. (At that stage, Petropars’ share was 19.9 percent.)

“The fate of the South Pars phase 11 has been determined and Petropars will continue developing the project alone,” Zanganeh said on Sunday, while visiting a turbine facility near Tehran.

Asked why the whole project had not been awarded to Petropars in the first place, he said Iran had wanted to attract foreign capital, “and Petropars was supposed to learn from other companies in the consortium.”

Iran has the world’s second-largest natural gas reserves, after Russia. The South Pars gas field, lying beneath Iranian and Qatari territory in the Persian Gulf, is considered the world’s biggest field.

China and Russia have been Tehran’s most important economic partners as U.S. sanctions have prompted European and other foreign businesses to leave. The CNPC withdrawal from the Iran deal comes days before U.S. and Chinese officials are due to hold another round of high-level talks aimed at resolving the bilateral trade war.

Less than a week ago, Zanganeh had sounded upbeat about Iran’s gas sector.

“In the gas sector, we have a good situation,” the IRNA state news agency quoted him as saying during a visit to Russia. “By the end of the current Iranian year [i.e.: March 2020] we will surpass the gas capacity of 7 million cubic meters (around 3 billion cubic feet) a day, and by the end of 2021, only from the South Pars gas field which is the largest gas field in the world, the total volume will reach 27 billion cubic feet a day.”

Zanganeh said Iran currently exports natural gas exports go countries in the region including Iraq, Turkey, Pakistan, Armenia and Oman.

Also putting a brave face on the situation was the regime’s first vice president Eshaq Jahangiri, who said Monday that the U.S. “maximum pressure” effort to undermine the Iranian economy had failed, “thanks to the endeavors of dear people across the country and the follow-up efforts by top executive officials.”

“In all sectors of oil, energy, agriculture, metals and mines, roads and urban development, good plans have become operational in the country,” Jahangiri said at the inauguration of a water supply project in northern Iran.


Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow

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