The MoUs with China, signed on 29 October during Oil Minister Bijan Namdar Zanganeh's visit to Beijing, include an upstream stake in Iran's largest new oil field, long-term liquefied natural gas (LNG) sales and the construction of a condensates refinery. Sinopec, which is to carry out the projects, has agreed to import 10 million tonnes a year (t/y) of LNG for 25 years - the production equivalent of two world-class LNG trains. It will also prepare a master development plan for Yadavaran oil field, which was formed earlier this year when the former Kushk and Hosseinieh oil fields were counted as one. Iran says the field has estimated reserves of 17,000 million barrels and represents one of the biggest prizes in Iranian energy. Zanganeh said it would be developed on a buyback basis.

The build-operate-transfer (BOT) condensates refinery has long been part of Iran's energy plans. It will have capacity of some 300,000-350,000 barrels a day (b/d) and is planned as part of a major overhaul of refining capacity to improve petrol quality and reduce the import of refined products. China will have export rights for all non-petrol products. The project is likely to need investment of up to $1,500 million and the term of ownership will expire after 25 years. The plant is to be built within three years.

If Sinopec goes ahead with the LNG and oil field projects, it is likely to bring in more experienced partners. Local oil analysts say that the Yadavaran project will need the assistance of leading international oil companies. The LNG project is even more complex. The few international contractors able to build the required facilities all say they will not bid for a project unless either the client or the offtaker has LNG experience - something that neither Sinopec nor National Iranian Oil Company (NIOC) can boast.

A similar problem exists with the Indian Oil Corporation (IOC)MoU, which covers the development and marketing of an LNG project. Although India has long been regarded as a prime destination for Iranian LNG, it has little experience in carrying out the projects. Another Indian company - Reliance- had an agreement with the UK's BPto carry out an LNG project, but now looks unlikely to pursue it. IOC is already in negotiations with NIOC affiliate National Petrochemical Companyto carry out the world's biggest olefins project in Assaluyeh, for which it has commissioned a feasibility study.