Iran Suspends Chinese Contract for North Pars Gas Field

Iran has suspended a $16bn gas field contract with China in the Gulf to coax it into meeting its obligations in another nearby field shared jointly with Qatar.

Iran's decision to let the Chinese develop the North Pars field 'hinges' on the role China plays in developing the South Pars Phase 11 segment first, Pars Oil & Gas Co managing director Moussa Souri said.

"Right now, the priority is developing the shared oil and gas fields, especially South Pars," he said. "The development contract for North Pars (field) with the Chinese is temporarily suspended".

The two fields are located in the Gulf. South Pars straddles the maritime border with Qatar, which has been extracting gas from it for the past decade.

Phase 11 is crucial to Iran's scheme of things as the Arabian nations plans to use it to fill its first-ever liquefied natural gas plant being built on the Gulf coast.

China National Petroleum Corporation (CNPC) had made frequent delays in implementing the development plan for Phase 11 of the South Pars gas field, even though the deal was signed 27 months ago, Souri stated.  Iran warned China about its lack of process earlier this year, saying it would re-assert control over South Pars development if investment in phase 11 of the giant offshore gas field is not ramped up.

In addition, Iran and CNOOC signed a $15 billion contract in September 2006 to develop North Pars field, but China has not started operational activities of this project yet.

CNPC won the $4.7bn contract to develop Phase 11 of the South Pars gas project in 2009 after Total withdrew from the deal following UN sanctions on Iran.

The Iranian share in the South Pars gas field, which is divided into 29 phases, has about 14 trillion cubic metres of gas, or about 8% of the total world reserves, and more than 18 billion barrels of liquefied natural gas resources.

Iran has the world's second largest natural gas reserves after Russia.