CNOOC: Iran Gas Not Critical to Supplies

CEO of Chinese offshore oil producer CNOOC Ltd. said Wednesday that a deal to buy natural gas from Iran would help the state-owned company's development but is not critical to securing its supply needs.

CNOOC President Fu Chengyu's comments indicate that CNOOC hasn't yielded fully to outside pressure to scrap plans to invest in Iran's Northern Pars gas field. Reports have said CNOOC could invest as much as $16 billion in Iran.

CNOOC's confirmation last year that it wanted to invest in the gas field triggered a forceful response from the United States, which called it a "bad time to be initiating major new commercial deals with Iran," as the Islamic republic hadn't halted its nuclear program.

Iran, which has some of the world's largest gas reserves, has been unable to develop most of its fields _ or build any terminals to ship liquefied natural gas _ because of diplomatic pressure on potential foreign partners and differences over pricing.

CNOOC has been negotiating with Iran while talking at the same time to potential suppliers in Qatar and Australia, as it seeks long-term contracts to supply LNG to the terminals it wants to build along China's coastline.

So far, only the Dapeng terminal in the southern province of Guangdong is operational, receiving LNG from a North West Shelf venture in Australia under a 25-year supply agreement.

CNOOC also operates the Fujian terminal, which is under construction and has contracted LNG supplies from the BP PLC-led Tangguh project in Indonesia.

In addition, Cnooc is leading the consortium building the receiving terminal at Shanghai, which struck a deal last year with Malaysia's state oil company Petroliam Nasional Bhd., or Petronas, for LNG supplies.

However, CNOOC's other planned terminals remain without supplies so far, including Ningbo in the eastern province of Zhejiang, which is close to several affluent cities.

Demand for natural gas in many regions of China is outstripping supply, especially as the fuel is cheaper than synthetic gas and liquefied petroleum gas, and has led CNOOC's rival PetroChina Co. to agree to pay market prices to secure future supplies.

In September, PetroChina agreed to separate deals for Australian LNG supplies from Royal Dutch Shell PLC and Woodside Petroleum Ltd.

Fu told reporters that CNOOC was waiting for its LNG business to become more profitable before injecting the assets into its CNOOC Ltd. unit, which is listed in Hong Kong and has its American Depositary Receipts traded in New York.

"When the time is right the parent company will inject these assets," said Fu, adding that "big profits" were needed for it to be worth doing so.