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Tehran β€” Iran has given priority to China National Petroleum Corp. for the second phase of the development of its onshore North Azadegan oil field, a senior Iranian oil official said Saturday.

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Speaking ahead of the launch of Iran's new petroleum contract in Tehran Saturday, state-owned National Iranian Oil Company's Managing Director Rokneddin Javadi outlined CNPC's extended involvement in the field.

"Based on the original contract of North Azadegan with China's CNPC, the company has been given priority to carry out the second phase of the development of the field," Javadi said.

The first phase was now complete and commissioning was underway, he said. It has the capacity to produce around 75,000 b/d of crude oil.



CNPC, which was awarded the project in 2009, was to have completed the first phase late last year. Its performance at North Azadegan is under scrutiny after it was removed from the South Azadegan development because of delays.

Under a buyback contract signed October 2010, the contractor was to be reimbursed from the field's own production.

"We are negotiating with it and as soon as we can finalize it, we will proceed. Otherwise, in the second round of the tenders, we will put it out. The same applies to Sinopec in the Yadavaran oil field," Javadi said.

Sinopec signed a contract in 2007 for the field and was to produce 85,000 b/d in the first phase and 100,000 b/d in the second phase.

Reserves at Yadavaran have been estimated at 17 billion barrels. Once all three phases of development are completed, the field is expected to produce 300,000 b/d of crude oil.

North Azadegan has 6.5 billion barrels of oil reserves in place and covers around 460 sq km of the whole Azadegan field, straddling Iran and Iraq.

International sanctions over Iran's nuclear program -- including a ban on oil and gas investment -- led Tehran to turn to Chinese companies to develop key oil fields.

Despite complaints about performance, Chinese state-owned oil companies are considered "strategic partners," Javadi said, adding that Iran hoped to maintain this relationship for future upstream projects.

--Aresu Eqbali, newsdesk@platts.com
--Adal Mirza, adal.mirza@platts.com
--Edited by E Shailaja Nair, shailaja.nair@platts.com