Chinese State Oil Company Withdraws from $5bn Deal With Iran

China National Petroleum Company (CNPC) has pulled out of a US$5 billion deal with Iranian company PetroPars consisting of the development of a portion of Iran’s huge offshore natural gas field, the Islamic Republic’s Minister of Petroleum Bijan Zangeneh announced Sunday.

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“China’s CNPC is no longer in the project,” the minister said without detailing or presenting any reason to the retraction, which also comes as China and the United States get increasingly involved in their trade war, both countries taxing billions of dollars on each other’s goods.

In a separate statement, Iranian Foreign Minister Mohammad Javad Zarif, complained Sunday about the sanctions imposed by the U.S. and the brutal consequences it has on foreign investments.

"We have been facing plenty of problems in the field of investment because of the U.S. maximum pressure policy," Zarif told a parliamentary committee, according to Tasnim news agency adding that they "are trying to remove the problems."

The South Pars field project seems to be the most recent deal to become the victim of the U.S. pressure campaign on Tehran after U.S. President Donald Trump's unilateral decision to withdraw his country from the 2015 nuclear deal between Iran and world powers.

In July 2017, French company Total signed a US$1 billion deal to develop the South Pars gas field in cooperation with CNPC and PetroPars, but it pulled out earlier this year over U.S. sanctions.

The CNPC then officially replaced Total in the project, but it suspended its investment later in December 2018 in response to U.S. pressure urging the Chinese company to refrain from injecting financing in Iran.

Despite its departure from the project, “I believe China will remain Iran’s main trade partner,” said Tehran-based political analyst Saeed Leilaz. 

Leilaz explained ​​​​​for instance, that a large amount of past oil revenue from China remained in the country, permitting the Persian country to buy goods from China without transferring money from Iran, and by that means, evading U.S. sanctions on Iran’s banks.

“The fate of the South Pars has been determined and Petropars will continue developing the project alone and by the end of the [Iranian calendar] year (to March 20, 2020), the first jacket will be installed in the phase for a platform with 500 mcf/d of gas production capacity,” Zangeneh said.