Sinopec Shakes Off U.S. Criticism; Strikes Deal with Iran

By Jason Simpkins
Associate Editor

China's largest oil refiner, China Petroleum & Chemical Corp. (SNP), commonly known as Sinopec, has signed a $2 billion deal with Iran to develop the Yadavaran oil field, Monday. The deal is further evidence of China's determination to acquire the resources necessary for its expansion, and its indifference to global, or more precisely U.S., opinion.

According to Iranian estimates, the Yadavaran field has reserves of 18.3 billion barrels of oil and 12.5 trillion cubic feet of natural gas "in place." Of that, 3.2 billion barrels of oil and 2.7 trillion cubic feet of natural gas are currently recoverable. 

"Various companies are continuing to invest in Iran and we are witnessing the full presence of foreign investments in the country," Gholam Hossein Nozari, Iran's oil minister, told the Voice of the Islamic Republic of Iran. "The other message this contract has is that if other countries intend to invest in our major oil and gas fields, they should not waste time, otherwise they will surely lose investment opportunities in Iran."

Nozari told Xinhua, the official Chinese news agency, that the Yadavaran field will produce 85,000 barrels of oil a day in four years and another 100,000 barrels a day three years after that. According to the agreement, originally reached in 2004, China would pay Iran as much as $100 billion over 25 years for liquefied natural gas and oil, and a 51% stake in Yadavaran.

Sinopec did not make any official announcement concerning the deal, which suggests the company was trying to keep it off the radar. However, the United States, which has repeatedly called for tougher sanctions on Iran as penalty for its alleged nuclear operations, registered its objection.

"We're deeply disappointed and disturbed at the reports [of the deal], and we'll be making this clear to the Chinese authorities," Jessica Simon, a U.S. State Department spokeswoman, told reporters in Washington. "Major new deals with Iran, particularly ones like these involving investment in oil and gas, really undermine international efforts to pressure the Iranians to comply with obligations already in place under the U.N. Security Council resolutions."

The criticism is particularly poignant as recent energy deals struck by China in Africa, Latin America and the Middle East have already been criticized by the international community as opportunistic and self-serving.

Chinese Foreign Ministry Spokesman Qin Gang fired back saying the deal was "business conducted by a Chinese company based on equality and mutual respect with Iran." And that "the Chinese government does not need to comment on [the deal]."

He could be right - especially considering a U.S. intelligence report released last week stated that, contrary to U.S. suspicions, Iran ended its nuclear weapons development in 2003.

News and Related Story Links:

  • Associated Press:
    Intel Report Spurs Calls for Iran Talks
  • MWC News:
    China signs $2bn Iran oil deal