Its state-owned parent Sinopec Group has agreed to buy 160,000 barrels per day (bpd) from Iran next year, up from this year’s 60,000 bpd, two sources familiar with the supply negotiations told Reuters on Thursday.
Including a separate pact, agreed earlier between China’s state-run Zhuhai Zhenrong Corp and National Iranian Oil Company, China has contracted to buy 400,000 bpd of Iranian crude for next year, roughly 6 percent of China’s total crude demand.
The supply deal comes days after the state-run Chinese oil giant finalised a $2 billion pact to develop Iran’s huge Yadavaran oilfield, after nearly three years of negotiations, part of Beijing’s plan to help ensure a stable, secure supply of oil for the world’s second-largest consumer.
Analysts saw the deal as a further sign of a long-term strategic relationship between China and Iran. Beijing is scrambling to fuel the world’s fastest growing major economy and Tehran is relying on oil revenue to establish itself as a dominant Middle Eastern power.
“There is a growing rivalry among the big powers for access to major sources of crude oil. For so long America had a monopoly on much of the crude oil exports from the Persian Gulf region and it is now facing increasing rivalry,” said Mehdi Varzi of London-based consultancy Varzi Energy.
YADAVARAN
The 400,000 bpd supply for 2008 would be a third above that set under this year’s term deals at just under 300,000 bpd, although China’s total imports from the world’s fourth-largest producer are far higher since it has been buying extra supplies on a spot basis.
An NIOC source familiar with the negotiations for the new term contract told Reuters by telephone that the deal was linked to the Yadavaran investment.
“This is a service type contract, they are taking more of our crude because they have invested heavily in our Yadavaran field, it is like payment for the investment,” the source said.
China has shown no reluctance to deepen ties with countries where Western companies fear to tread, such as Sudan and Myanmar.
Its pragmatic state oil firms have long brushed aside the threat of more United Nations sanctions on Iran’s disputed atomic activities, focusing instead on commercial terms.
China may extend spot purchases from Iran, now Beijing’s third-largest crude supplier after Saudi Arabia and Angola, for next year, to meet strong fresh demand from the country’s new refining facilities, a Beijing-based trading source said.
Beijing has been reluctant to back a U.S.-led drive for further sanctions against Iran, seeing it as a key oil supplier as China’s crude imports soar to meet half of its demand.
In a push to boost the use of natural gas to curb dependence on oil that now costs nearly $100 a barrel, China is also interested in Iran’s rich gas reserves, the world’s second-largest after Russia.
Apart from the two crude pacts, China buys fuel oil, a heavy refinery product, from Iran under a one-year contract of around one million tonnes. (Additional reporting by Luke Pachymuthu in Singapore, editing by Jonathan Leff and Anthony Barker)
