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Iran Says Signs Gas Deal With China, Replaces Total

Phases 2 and 3 of the South Pars gas field were opened in 2003.
TEHRAN (Reuters) -- Iran has signed a contract with China National Petroleum Corporation (CNPC) on developing a part of the Islamic state's South Pars gas field, replacing France's Total, the official IRNA news agency said.

The agreement for the development of Phase 11 of the giant natural-gas field in the Persian Gulf was signed in Beijing by Seifollah Jashnsaz, managing director of the state National Iranian Oil Company (NIOC), and his CNPC counterpart, IRNA said.

"The signing of the cooperation agreement between Iran and China took place as CNPC has replaced the French company of Total," IRNA said.

Upper stream development of Phase 11 had an estimated cost of $4.7 billion, IRNA said in an earlier report, without making clear whether this was the value of the contract with the Chinese state firm.

Total has a memorandum of understanding with NIOC to develop Phase 11 of South Pars, but the project has been overshadowed by haggling over contract terms.

Total, which earlier on Wednesday had said it considered reports that Iran was expected to sign the deal with CNPC to be a market rumor, had no immediate comment after IRNA reported that the signing had now taken place.

IRNA suggested the Paris-based company could still be involved in the downstream development of the South Pars field.

South Pars, the world's largest reservoir of gas, is shared by Iran and Qatar. The Iranian part is divided into 24 phases.

In March, Jashnsaz said Total had wasted time in work on the phase and a new partner would enter the project with a "leading share." He did not then name the new partner.

In April, Total's chief executive Christophe de Margerie said it saw the investment terms offered by Iran for developing gas fields as "not attractive enough."

Earlier in 2009, the Paris-based company had said it did not expect to sign an agreement on South Pars anytime soon.

Western Pressure

U.S. and UN sanctions on Iran over its nuclear program, as well as political pressure from Washington, have stopped Western energy companies for signing up to new deals to exploit the world's second-largest oil and gas reserves.

Iran is drawing interest from Indian and Chinese firms seen as less susceptible than many other companies to such Western pressure.

Iran is the world's fifth-largest oil exporter, but the sanctions and other factors have slowed the Islamic republic's development of gas exports.

On June 2, a senior executive of Norway's StatoilHydro said it should complete a South Pars project this year and that it had no further plans for investment in the country for now.

Iran said on May 31 it planned to issue $12.3 billion of foreign-currency- and rial-denominated bonds over three years to help finance the development of South Pars. Investment for remaining projects at the fields would be around $50 billion.