April 13, 2010 / 3:39 PM / 7 years ago

Energy ties grow as China resists Iran sanctions-sources

* No change in pace of Chinese investment in Iran

* China fills vacuum left by European oil firms

By Simon Webb and Chen Aizhu

DUBAI/BEIJING April 13 (Reuters) - Chinese state oil firms have maintained the pace of project development in Iran while Beijing resists any new sanctions on the energy sector designed to press Tehran to curb its nuclear programme, industry sources said on Tuesday.

China, which has close economic ties with Iran, has much to lose from any sanctions that limit new investment to develop the world's second-largest oil and gas reserves. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a factbox on Iran's crude export and fuel import customers, click on [ID:nLDE63A011] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Chinese firms have stepped into the vacuum left by western companies who have yielded to years of political pressure to steer clear as the U.S. and its allies look to isolate Iran over its nuclear programme.

Western powers suspect Iran wants to develop nuclear weapons, which Tehran denies.

"Everything is moving ahead as planned," said a source at China's National Petroleum Corporation (CNPC). "As a state energy firm, your job is to serve the state interest. You do what the government encourages you to do."

China has made clear this week that it dislikes a proposed ban on new energy investment in Iran as it joined major powers drafting a sanctions resolution against Iran for refusing to suspend its uranium enrichment programme. [ID:nTOE63C07X] [ID:nN08208811]

Iran's foreign ministry said on Tuesday it did not believe China was close to approving new U.N. sanctions. ID:nLDE63C1EJ]

ENERGY HUNGRY

Tehran has become more dependent on investment and technology from energy-hungry China over the past few years as the political dispute has dragged on and U.S. and European firms have stalled on new deals with Iran.

"The Chinese are among the last ones there with a significant presence," said Valerie Marcel, associate fellow at Chatham House.

CNPC clinched a $4.7 billion deal earlier this year to develop part of Iran's giant South Pars gas field, supplanting Total (TOTF.PA) as lead partner in the project after the French firm delayed its investment decision under political pressure.

CNPC beefed up its staff numbers in Iran late last year, even as Western firms that were still involved in Iran scaled back. It also has a $2 billion deal to develop the North Azadegan oilfield. China's Sinopec has a deal for another of Iran's largest oilfields, at Yadavaran.

Chinese investment and progress on new projects has sometimes been slow, industry sources said, but this was due to difficulties working with Iranian contractors and bureaucracy rather than politics.

"The Chinese are developing at a reasonable pace," said a senior executive at a Western oil firm. "They had a steep learning curve to go through initially, but they weren't slow due to geopolitical concerns."

For U.S. and European oil firms sanctions on new energy projects would make little difference to their approach to Iran. The U.S. banned its firms from investing there years ago.

European firms such as Italy's ENI (ENI.MI) and Norway's Statoil (STL.OL) have been finishing off projects they began years ago, and have scaled down their presence as work ends.

"Not much has changed," the Western oil firm executive said. "We will hold our position while we see what has been concretely proposed in Washington. We are on a watching brief."

In the first months of U.S. President Barack Obama's administration, energy firms stepped up contacts with Iran in the hope that relations would improve. But political turmoil after Iran's disputed presidential elections last year sent them back to their tricky holding game, whereby Europe's energy giants try to convince Tehran they are interested while playing down any progress back home.

Potential new sanctions that U.S. politicians want to impose on fuel suppliers to Iran have had more of an impact in the past year on international oil firms' trade links with Iran.

Russia's LUKOIL (LKOH.MM) was the latest to halt shipments to Iran, which depends on fuel imports to meet up to 40 percent of its gasoline demand. [ID:nLDE63606I] It follows Royal Dutch Shell (RDSa.L) and trading giants Glencore and Vitol in halting sales. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For more stories on political upheaval in Iran, click on [ID:nLDE5BD2ES] For full coverage of a nuclear summit in Washington, click on [ID:nNUCLEAR] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ (Additional reporting by Dmitry Zhdannikov in Moscow, Tom Bergin in London, Sylvia Westall in Vienna, Muriel Boselli in Paris and Stephen Jewkes in Rome; Editing by Sue Thomas)

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