China National Petroleum Corporation (CNPC) is starting development work and is nearing engineering subcontractor awards at Iran’s North Azadegan oilfield.

The decision could be a “Chinese test balloon to gauge its ability to pursue projects amid international sanctions on Iran, given that Chinese national oil companies so far have procrastinated in committing financially at most Iranian projects”, according to an analyst note by Samuel Cizuk from the UK’s IHS Global Insight.

Chinese oil firms have so far held off committing financially in Iran, despite the number of letters of intent or memorandums of understanding signed in the country’s upstream sector. However, Iran’s need for international technology and investment makes it unlikely to start punishing China for non-performance.

CNPC is preparing an award of engineering, procurement and construction (EPC) contracts for the North Azadegan field to its engineering and oil service subsidiaries. CNPC has completed pre-engineering studies and development plans and is now in the last stages of evaluation of the EPC bids.

Four Chinese firms, all subsidiaries of CNPC, have submitted bids for the North Azadegan field including:

• China Petroleum Engineering Construction Company
• Liaohe Oilfield Company
• CNPC First Construction Company
• CNPC Six Construction Company

The development of the North Azadegan field calls for the construction of ground facilities, export pipelines and water injection facilities, with first oil targeted in 2013 at a level of 70,000 barrels a day (MEED 18:2:11).