State-owned entity China National Petroleum (CNPC) has reportedly succumbed to US pressure and suspended investment in the $4.8bn South Pars giant natural gas project in Iran.
The company took the decision to stop investing in the project in response to pressure from the US and ease tensions amid ongoing talks between the US and China to resolve their trade dispute, Reuters reported citing three unnamed Chinese state oil executives.
The move comes weeks after Iran announced that CNPC will replace French oil and gas major Total as the operator of the Phase 11 project at South Pars.
Total exited the project after failing to secure an exemption for the project from the US sanctions on Iran. The company has projects in the US and feared the potential cost of violating the Iran sanctions on its US operations.
Washington reintroduced sanctions on Iran last month after walking out of the 2015 nuclear deal earlier this year.
One of the sources told the news agency that CNPC took the decision to suspend investment in South Pars following four rounds of talks in Beijing with senior US officials.
A second source told Reuters: “China sees the relationship with the US as paramount over anything else. As a state-owned entity, CNPC will stay clear of bringing any unwanted trouble into this relationship as the US-China trade talks are underway.”
The first source added that Iran now has a 120-day period to decide whether to keep CNPC as a dormant investor or annul the deal.
Meanwhile, Iranian Oil Minister Bijan Zanganeh stated that if CNPC pulls out of the project, then it would be deemed as a violation of the contractual terms.
Zanganeh was quoted as saying: “When Total left, CNPC was to take over according to the contract, and if it does not, this would be a breach of contract and we’ll deal with it according to our contractual rights.”
Located in an area between Iran and Qatar in the Persian Gulf, South Pars is regarded as the world’s largest gas field, covering a total area of 9,700km².
The Iranian section of the field is estimated to contain around 14 trillion cubic metres of gas and 18 billion barrels of liquefied natural gas (LNG).