Chinese companies have been gaining exclusive access to some of Iran’s most productive oil & gas fields for the past two decades, despite limited efficiency at developing new projects, and to the long-term detriment of Iran’s ability to profit from its own energy reserves.
Iran, the world’s third-largest oil and second-largest natural gas reserve holder, is struggling to export its oil and meet its own energy needs due to outdated infrastructure. In hopes of raising its oil & gas revenue, the Iranian government awarded at least 14 contracts worth at least $79 billion (about $4.34 quadrillion Tomans, at an exchange rate of 54,960 Tomans/$1) to Chinese oil & gas companies over the past two decades.
Of the 14 projects Iran’s government awarded to Chinese companies since 2004, at least 9 were canceled by either the Iranian or the Chinese side, or fell significantly behind schedule, as shown in the chart below.
Despite their poor overall progress in the revitalization of the oil & gas sector, these Chinese companies have managed to cement their influence over the future development of Iran’s energy reserves.
Open-source documents reviewed by Tehran Bureau show Chinese nationals have registered a total of 15 companies active in the oil & gas sector since 2004. Additionally, two universities and two research institutes are active in research and development relating to the oil and gas sector. These organizations have registered a total of 45 patents for related products and technology. The large-scale patenting process, in particular, suggests that aside from selling its energy to China at cutthroat prices, Iran is permanently ceding its right to profit from the development of its oil and gas fields to Chinese contractors. The Iranian government does not control when, and if, the contractors will actually complete their tasks.
China’s obligations in Iran should be weighed against its interests elsewhere in the region. Under growing international isolation, Iran’s purchases from China have fallen from US$1.5 billion a month in 2016 to only $500 million in 2022. Saudi Arabia’s imports from China, by contrast, have risen from about the same level of $1.5 billion a month 2016 to $3.5 billion a month today.
At the same time, Iran’s oil sales on the global oil market have fallen at least 65 percent since 2017, according to OPEC data, severely diminishing key revenues as well as its geostrategic clout. In this environment, Iran’s dependence on disadvantageous energy sales to China has increased, and now accounts for 70% of its total energy exports.
This inroad into a country’s oil and gas sector mirrors China’s activities in fossil fuel-rich countries throughout the world. In Angola, Beijing invested $60 billion over several decades in various oil and infrastructure projects, motivated by its growing domestic energy needs. After an initial honeymoon period, a majority of the projects, including oil blocks operated by Chinese companies, fell into disrepair and were mired by opaque deals with corrupt local officials. As a result, Angola is left honoring a disadvantageous deal that forces it to sell its remaining oil to China below global market prices.
Chinese Oil Companies in Iran
Chinese oil & gas companies escalated their activity in Iran in the early 2000s, when intensifying sanctions on Iran’s oil sector forced many other international firms to leave the country.
The two main companies responsible for China’s oil & gas activities are China National Petroleum Corporation (CNPC) and China Petroleum and Chemical Corporation (Sinopec). Their subsidiaries have acquired various oil contracts for the development of Iran’s oil and gas fields.
We have reviewed these companies and their activities in detail in a series of articles. These articles will be published in the following days.