China CNPC signs MOU with Iran on South Azadegan

BEIJING, July 31 - China's CNPC signed a memorandum of understanding (MOU) with National Iranian Oil Co (NIOC), promising to pay 90 percent of development costs for the South Azadegan oil field while taking ownership of a 70 percent stake, Iranian Oil Ministry website SHANA said.

The report did not disclose financial terms, but Naji Sadouni, managing director of Oil Engineering and Development Co of NIOC said the project needs investment of up to $2.5 billion, adding it could produce 260,000 barrels of oil per day.

Japan's INPEX holds 10 percent of the oil field, SHANA reported in a newsletter dated July 29, citing Sadouni.

But a CNPC manager based in Beijing told Reuters on Friday that the MOU was actually signed in early spring of this year and the two sides made no real breakthrough in the negotiation since then.

"The MOU is not a binding contract, and we are still negotiating with NIOC about specific details," said the CNPC source, who declined to be named because he was not authorised to speak to the media.

He said that CNPC, parent of PetroChina <0857.HK>, is very eager to complete the deal but added that NIOC seemed reluctant to relinquish control of the oil field.

"Because of the world economic crisis, Nico company will not be able to provide for required financial sources," Sadouni said.

CNPC won a deal in January to develop the North Azadegan oilfield. The deal is worth $2 billion in its first phase. Under the first phase lasting 48 months, the capacity would reach 75,000 barrels per day and the tenure of the project is 12 years.

Iranian media also reported in June that CNPC signed a $4.7 billion deal with NIOC to develop phase 11 of South Pars gas field, though CNPC officials have kept mum on the deal. (Reporting by Eadie Chen and Chen Aizhu; Editing by Ken Wills)