In Huge Blow, Iran Confirms China Has Exited Crucial $5 Billlion Gas Project

In a huge blow to Iran's prospects for weathering the tightening economic noose of US sanctions, and as the White House seeks to take's Iran's crude exports down to 'zero', China National Petroleum Corp - the state-owned parent company of China's second-largest oil producer, PetroChina, and one of the largest integrated energy groups in the world - has pulled out of a $5 billion natural-gas project in Iran, the WSJ reports.

This also just following last month's US sanctions on six entities, including a unit of China's COSCO Shipping Corp., which stood accused of deliberately purchasing and covertly attempting to transport Iranian oil. 

Iranian oil minister Bijan Zangeneh confirmed Sunday that domestic company Petropars Co. is now in full control of a planned development project in the South Pars gas field as a result of China National Petroleum Corp. (CNPC) backing out of the deal. The Chinese company itself was to replace France's Total SA after it exited Iran, citing US repercussions related to Washington sanctions.

The sprawling South Pars gas field on the Persian Gulf, via Reuters.

Zangeneh's statement was brief, but he acknowledged the Chinese state-run giant was “no longer in the project” and that the company “had pulled out of a contract” to develop the field, according to state media. 

Washington will take it as another victory for its unprecedented and aggressive sanctions on Iran, given as the WSJ reports:

But CNPC officials have said the company struggled to find banking channels to transfer funds to Iran due to U.S. pressure. CNPC’s own bank, Bank of Kunlun, which is the main conduit for China’s Iran trades, has told customers it no longer accepts trades with the Islamic Republic, though it has said publicly it intends to keep its business with Tehran.

The move is also a blow to the Islamic Republic's natural gas supply needs. Given the majority of its electricity is generated via natural gas run power plants, the South Pars gas project is seen as crucial to maintaining domestic electricity supply levels

China is Iran's last major international purchaser of its oil; however, the latest Chinese customs data has shown its Iranian imports in steep decline — now at a little above 200,000 barrels a day versus the 700,000 barrels a day imported prior to US sanctions hitting.