China-Iran oilfield, LNG deal seen delayed -source

SINGAPORE, Mar 22 (Reuters) China's multi-billion-dollar deal to buy LNG from Iran in exchange for access to a giant oilfield has been delayed until after mid-2006 due to a price disagreement, a senior industry official familiar with the discussions said on Wednesday.

Sinopec Group, state-owned parent of listed Sinopec Corp., agreed in October 2004 to take the lead in developing Iran's Yadavaran oilfield and to buy 10 million tonnes of liquefied natural gas (LNG) a year for 25 years in a deal worth as much as 0 billion.

But the two sides have failed to agree on final terms.

The semi-official Caijing Magazine in February cited a Sinopec executive as saying that a delegation of the National Development and Reform Commission, China's economic-planning body, could go to Iran to sign a joint deal as early as March.

''It definitely won't be signed this month and I can't see it happening by June either,'' the industry official, who declined to be named, told Reuters.

Negotiations over Iranian oil projects often drag on for years. Japan's INPEX negotiated for four years before finally clinching a deal in 2004 for Iran's nearly SINGAPORE, Mar 22 (Reuters) China's multi-billion-dollar deal to buy LNG from Iran in exchange for access to a giant oilfield has been delayed until after mid-2006 due to a price disagreement, a senior industry official familiar with the discussions said on Wednesday.

Sinopec Group, state-owned parent of listed Sinopec Corp., agreed in October 2004 to take the lead in developing Iran's Yadavaran oilfield and to buy 10 million tonnes of liquefied natural gas (LNG) a year for 25 years in a deal worth as much as $100 billion.

But the two sides have failed to agree on final terms.

The semi-official Caijing Magazine in February cited a Sinopec executive as saying that a delegation of the National Development and Reform Commission, China's economic-planning body, could go to Iran to sign a joint deal as early as March.

''It definitely won't be signed this month and I can't see it happening by June either,'' the industry official, who declined to be named, told Reuters.

Negotiations over Iranian oil projects often drag on for years. Japan's INPEX negotiated for four years before finally clinching a deal in 2004 for Iran's nearly $2 billion Azadegan project, one of the biggest undeveloped oilfields in the world.

Yadavaran has estimated reserves of about 3 billion barrels and is expected to produce 300,000 barrels per day (bpd), about the same volume of crude that China now imports from Iran, the world's fourth-largest oil exporter.

The source did not give further details, but Chinese firms have been increasingly reluctant to sign up new long-term LNG supply deals due to soaring prices for the clean fuel.

Would-be buyers such as Sinopec, under pressure to help China increase usage of the fuel to curb pollution, have been unable to repeat the cheap deals signed several years ago to supply the country's first two import terminals due to soaring oil prices.

The potential deal comes amid Iran's stand-off with the West over its pursuit of a nuclear programme, which Tehran says is for civilian use.

With the U.N. Security Council now debating the next step, China has supported Russia in holding up a draft agreement that would tell Tehran to stop its atomic research, which Western powers believe is a cover for building nuclear weapons.

Caijing said that Sinopec would take a 51 per cent stake in the project, and India's Oil and Natural Gas Corp. (ONGC) would own 29 per cent, slightly bigger shares than had been initially agreed.

The remaining 20 per cent could go to the National Iranian Oil Company (NIOC), the magazine said, adding that Royal Dutch Shell had also expressed interest in the remaining fifth.

REUTERS SD VC1910 billion Azadegan project, one of the biggest undeveloped oilfields in the world.

Yadavaran has estimated reserves of about 3 billion barrels and is expected to produce 300,000 barrels per day (bpd), about the same volume of crude that China now imports from Iran, the world's fourth-largest oil exporter.

The source did not give further details, but Chinese firms have been increasingly reluctant to sign up new long-term LNG supply deals due to soaring prices for the clean fuel.

Would-be buyers such as Sinopec, under pressure to help China increase usage of the fuel to curb pollution, have been unable to repeat the cheap deals signed several years ago to supply the country's first two import terminals due to soaring oil prices.

The potential deal comes amid Iran's stand-off with the West over its pursuit of a nuclear programme, which Tehran says is for civilian use.

With the U.N. Security Council now debating the next step, China has supported Russia in holding up a draft agreement that would tell Tehran to stop its atomic research, which Western powers believe is a cover for building nuclear weapons.

Caijing said that Sinopec would take a 51 per cent stake in the project, and India's Oil and Natural Gas Corp. (ONGC) would own 29 per cent, slightly bigger shares than had been initially agreed.

The remaining 20 per cent could go to the National Iranian Oil Company (NIOC), the magazine said, adding that Royal Dutch Shell had also expressed interest in the remaining fifth.

REUTERS SD VC1910