Energy cooperation between Iran and China has geared up after the two governments signed a cooperation framework last week to allow China to import Iranian liquefied natural gas (LNG) and develop an oil field - a deal worth up to US$100 billion.

Many Chinese energy firms including China National Petroleum Corp (CNPC), Sinopec Group, Sinochem, China National Offshore Oil Corp, Zhuhai Zhengrong, and Citic Group, are discussing investing in oil exploration with Iranian companies. They are also taking about construction of refinery and petrochemical plants in Iran, according to sources from Iranian Embassy to China.

And the LNG is the business that spearheaded the energy co-operation.

Under a memorandum of understanding signed last Thursday, a group of Chinese companies including CNPC and Sinopec, have committed to buying several million tons of LNG annually for 25 years from Iran. In exchange, the Chinese companies will be allowed to develop the giant Yadavaran field which is one of the largest in Iran, according to embassy sources.

The specific size of the LNG purchase has not been decided yet, pending negotiations between Chinese companies and the National Iranian Oil Company.

The deal is estimated to be worth between US$75-100 billion, sources said. The sources say they expect the amount of LNG could exceed 10 million tons a year as the Chinese gas market is taking off.

Delegations of Chinese and Iranian companies will start commercial negotiations next month.

Chinese companies, such as CNPC and Sinopec, will discuss among themselves how to split the Iranian LNG they may purchase.

(China Daily November 3, 2004)