OREANDA-NEWS. October 03, 2011. China will make up a delay of more than two years in the development of phase 11 of Iran's South Pars gas field within three to four months, Iran's Pars Oil and Gas Company (PIGC) said.

Iran recently warned China's CNPC that it would award the project to local contractors if the Chinese state-owned company did not speed up work on the project. The two sides held a meeting in Tehran last week to discuss the issue.

"It was agreed (at the meetings) that the Chinese side submit its plan within the next two weeks for the acceleration of the project and it will make up for its delay in three to four months," PIGC Managing Director Mousa Souri was quoted as saying by the Iranian oil ministry website Shana.

PIGC is in charge of overseeing development of the offshore South Pars gas field, which contains more than half of Iran's total natural gas reserves and is being developed in phases.

"(Oil Minister) Rostam Qassemi stressed to the Chinese side the need to fulfill its commitments and promised that if it shortens the project's period, it will be rewarded," Souri said, noting that the \\$4.7 billion development of South Pars Phase 11 was CNPC's biggest project in Iran.

China, which has made significant investments in Iran, has some USD 49 billion worth of energy projects in the country.

CNPC took the Phase 11 development project over from France's Total and Malaysian Petronas more than two years ago.

The buyback contract signed with CNPC in June 2009 stipulated completion within 52 months.

Souri said that Iran and China had agreed to establish a joint committee to "examine the issues of Phase 11 and the Chinese side is due to set up its office in the (Southern port city of) Assaluyeh as soon as possible."

Phase 11 of South Pars is slated to produce 2 Bcf/d of gas and the project includes plans for an LNG terminal.

Energy experts say that Iran has 137.6 billion barrels of proven oil reserves, and 29.61 trillion cubic meters of proven gas reserves. In June this year, The National Iranian Oil Company (NIOC) had announced discovery of another large deposit of crude oil and natural gas in the South Pars field in the Persian Gulf. It was estimated that the discovery would increase Iran's crude and gas condensate reserves by one billion barrels.

The South Pars gas field is located in the Persian Gulf, north of Iran's maritime border with Qatar. The field's reserves are estimated at 14 trillion cubic meters of gas and 18 billion barrels of gas condensates.

Iran, which sits on the world's second largest reserves of both oil and gas, is facing US sanctions over its civilian nuclear program.

Iranian officials have dismissed US sanctions as inefficient, saying that they are finding Asian partners instead. A large number of Chinese, Indian and other Asian firms have negotiated or signed up to oil and gas deals with Iran.

In a recent case, Iran signed gas deals worth \\$14 billion with Malaysia's SKS Group in December 2008, which included a contract to build an LNG plant.

Following US pressures on companies to stop business with Tehran, many western companies decided to do a balancing act. They tried to maintain their presence in Iran, which is rich in oil and gas, but not getting into big deals that could endanger their interests in the US.

Yet, after oil giants in the West witnessed that their absence in big deals has provided Chinese, Indian and Russian companies with excellent opportunities to sign up to an increasing number of energy projects and earn billions of dollars, they started showing increasing interest to invest or expand work in Iran.

Some European states have also voiced interest in investment in Iran's energy sector after a gas deal was signed between Iran and Switzerland three years ago regardless of the US sanctions.

The National Iranian Gas Export Company and Switzerland's Elektrizitaetsgesellschaft Laufenburg signed a 25-year deal in March 2008 for the delivery of 5.5 billion cubic meters of gas per year.