Iran will remove China National Petroleum Corp from the major Azadegan oil field project due to "lack of commitment," oil ministry news service Shana reported Tuesday.
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This follows an order from the Iranian oil minister Bijan Zanganeh. The Chinese company inked the deal with Iran more than four years ago.
"Following repeated verbal and written warnings and a written warning issued last winter, CNPC promised to move the project forward," Rokneddin Javadi, managing director of National Iranian Oil Company, was quoted as saying.
"Even though one month extra was given to this company after the 90-day ultimatum, no effective work has been done by this contractor. Therefore, since this Chinese contractor did not fulfill its commitments during this period, the order to end the company's contract in the development of South Azadegan will be issued," Javadi said.
He stressed that the oil ministry did not intend to "weaken or expel" contractors but it did expect them to abide by project timetables.
CNPC signed the $2.5 billion buyback deal with NIOC in October 2009 to develop the South Azadegan field under a two-phase plan with a target of 600,000 b/d of crude oil production. The western onshore oil field was due to produce 320,000 b/d of oil and 197 million cubic feet/d of gas within 52 months.
According to the Iranian contractor involved in the project, only seven of the originally planned 185 wells have been drilled so far. The massive oil field which straddles Iran and Iraq is important for Iran if it is to keep up with its OPEC fellow member and neighbor in crude oil production.
Iran's energy sector is hungry for investment and advanced technology to tap its reserves and maintain production from its ageing fields.