China’s state-run energy giant is making a new approach to clinch a $3 billion deal for more development of an Iranian oil field, seeking to take advantage of waivers allowed under U.S. sanctions as two European nations have ended crude purchases, Wall Street Journal reported.
The latest move highlights the divergent ways nations are reacting to temporary exemptions from U.S. sanctions on Iran. Beijing’s decision to pursue lucrative deals with Tehran and deepen its presence in Iran contrasts with a retreat by Italy and Greece stemming from fear that financial transactions and physical trade with Iran have become too difficult.
China Petroleum & Chemical Corp., or Sinopec, told its government-owned counterpart, the National Iranian Oil Co., it wanted its share of the field’s production to be granted under the U.S. waiver allocated to China, one person said.
Sinopec is driving a hard bargain, making stringent demands, according to the Journal. The company asked to buy equipment of its choice, made in China, and requested reimbursement for costs as soon as the new development undergoes testing, terms Iran normally refuses.
While U.S. sanctions, which went into effect in November, prevent companies from signing contracts to access new oil fields in Iran, Washington granted exemptions allowing Iranian oil purchases by China, India, Japan, South Korea, Turkey, Taiwan, Italy and Greece to avoid a global oil-price spike.
The Chinese company has informed the U.S. State Department about its Iran oil business, people familiar with the matter told the Journal. Sinopec believes it wouldn’t run afoul of a U.S. ban on signing new development deals, as its proposal for further development is part of an existing contract to operate the field, according to the people.
Late last year, after the U.S. allowed China to keep purchasing as much as 360,000 barrels of Iranian oil a day, Sinopec proposed a $3 billion investment plan in the Yadavaran oil field it operates in western Iran, according to people familiar with the proposal. The deal, if agreed, would double production at the field to 180,000 barrels a day within six months, the Journal noted.