* Drilling to start as early as March
* Beefs up Iran operations with focus on 3 oil, gas
* Gas delivery remains in question due to sanctions
(Adds analyst comment, write throughout)
By Chen Aizhu
BEIJING, Feb 10 China's top energy group CNPC
has clinched a deal to develop phase 11 of Iran's South Pars
gas project, and beefed up its business operations in the
Islamic Republic that sits on one of the world's largest
hydrocarbon reserves, an industry official told Reuters.
CNPC will start drilling in the gas field as early as March
to evaluate the reserves, after its initial overall development
plan won Tehran's approval near the end of last year, pushing
ahead the $4.7 billion project after a preliminary pact was
sealed last June.
CNPC, parent of listed PetroChina (0857.HK), had beefed up
staff in December to about 60, based in Beijing and Tehran,
dedicated to operations in Iran that also include two oil
projects that together with South Pars will likely cost a
combined $10 billion.
"The real work will start as soon as after the Chinese New
Year holiday," said the official familiar with CNPC's
China, one of the five U.N. Security Council members with
veto power, reiterated last week that it preferred dialogue to
sanctions handling Tehran as six major powers discussed efforts
to persuade Iran to halt its nuclear enrichment programme.
By starting real exploration works, CNPC will gain a
foothold ahead of other international firms such as French
major Total (TOTF.PA) or domestic rival CNOOC, which have been
stalling at the levels of memorandums of understanding.
"If the project went ahead, the overall delivered cost of
LNG into China would likely be lower than the existing
oil-indexed LNG contracts such as from Qatar and Australia,
because they will be operating throughout the value chain,"
said Gavin Thompson of energy consultancy Wood Mackenzie.
But gas production and delivery from the giant South Pars
remain in question partly because the United States and U.S.
sanctions prohibit access to key liquefying gas technologies
that are mostly in the hands of U.S. firms, analysts have said.
"The process to deliver gas will be notoriously slow," said
A CNPC spokesman was not immediately available for comment.
IRAN & IRAQ
Company officials told Reuters that CNPC had internally
acclaimed 2009 as the year marking one of the firm's biggest
feats in its decades-long overseas drive, led by its ambitious
and charismatic chairman, Jiang Jiemin.
Apart from the South Pars deal, CNPC won two service
contracts in Iraq to develop giant oilfields Rumaila and
Halfaya, allowing the firm access to total estimated reserves
of about 21 billion barrels. [ID:nGEE5BA276]
"CNPC has made it a distinctive strategy: to gain a
foothold in countries with top reserve bases. Iraq and Iran are
among the top in the list," the official said.
In Iran's oil sector, CNPC is already in a deal to develop
the North Azadegan field into a 120,000-barrel per day field at
a cost of at least $2 billion.
CNPC became the operator of the smaller, aging
Masjed-i-Suleiman (MIS) field that will produce 20,000 bpd,
industry sources have said.
It was not clear if Petronas, Malaysia's state oil and gas
firm experienced in LNG business, would still tie up with CNPC
for the South Pars project. Petronas said last June it would
partner with CNPC when the Chinese firm took over as the main
foreign investor. [ID:nSP71781]
The South Pars project is part of a huge formation shared
with Qatar that makes up the world's largest pure gas reserve.
The Iranina part, divided into 24 phases, could cost more than
$40 billion to develop.
(Editing by Clarence Fernandez)