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    CNPC Exits Iran's South Pars Project


An Iranian state company will be left to develop the project on its own.

by: Dalga Khatinoglu

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CNPC Exits Iran's South Pars Project

China National Petroleum Corp. (CNPC) has pulled out of the South Pars Phase 11 (SP11) development in Iran, Iranian oil minister Bijan Zanganeh announced on September 6, leaving local state firm PetroPars to advance the project alone.

Under a $4.8bn contract signed in 2017, CNPC took a 30% share in SP11 while France’s Total took a 50.1% position, with PetroPars, a subsidiary of Iranian state oil producer NIOC, holding the remaining 19.9%. But Total was later forced out of the project because of US sanctions, transferring its share to CNPC. Now that CNPC has withdrawn, PetroPars is the sole operator.

SP11’s first-stage development involves construction of two 1,500-2,000-mt platforms, the drilling of 30 wells, the extension of five pipelines, and the installation of a fibre cable and mooring buoy – all within the next 40 months. Zanganeh also touched upon the problems surrounding SP11’s $2.5bn second stage, which will add a 20,000-mt platform with large compressors. He said Iran lacked experience for this undertaking, but had no other choice but to rely on local companies.

According to state-owned gas firm NIGC’s assessment, production at the South Pars development as a whole should peak in 2023, and then begin declining sharply. Currently the gas pressure at its 38 active platforms is about 120 bars, equal to 118.5 atmospheres. But after 2023 it will fall by 7 bars/yr, causing an annual output decline of 10bn m3.

Iran produced about 260bn m3 of gross gas, of which 240bn m3 was methane during the last fiscal year ending March 21, according to official documents obtained by NGW. More than three fourths of this volume were produced from South Pars’ 18 phases. Iran shares the offshore field with Qatar, with the former's portion containing 14 trillion m3 of gas.

Qatar has extracted 2.5 times more gas from the field cumulatively than Iran, as it started production of its section 10 years earlier in 1989. More than two thirds of the deposit’s resources are also situated on the Qatari side. Qatar aims to raise production levels by a further 25-30%, with the help of large investments and co-operation with Western partners.

Back on the Iranian side, NIGC forecasts that a further 8-10 platforms with 20,000-tonne weight each and large-sized compressors will need to be installed to prevent production dropping after 2023, at a cost of between $20-25bn. Zanganeh said a local company called Mapna might be able to help supply this new equipment. But Mapna, which has experience mostly in power generation, itself relies on foreign equipment supplies, including $1.6bn turbines it has been buying from Germany’s Siemens in recent years. As such, there are doubts that Mapna is up for the task.