June 17, 2011 / 5:51 PM / in 8 years

Iran warns China over South Pars gas deal-report

* Warns will replace CNPC with local firms if delays go on

* Potential South Pars income huge if all phases completed

TEHRAN, June 17 (Reuters) - China should fulfil its duties in developing a phase of Iran’s South Pars gas field or the contract would be cancelled, the semi-official Mehr news agency on Friday quoted the country’s top oil company as saying.

Tehran signed a $4.7 billion contract with China National Petroleum Corporation [CNPET.UL] (CNPC) in 2009 to help develop phase 11 of South Pars, replacing France’s Total SA (TOTF.PA) which it had accused of repeated delays.

Mehr said the National Iranian Oil Company (NIOC) had warned that it would “replace CNPC with domestic companies” if the Chinese corporation continued to delay the project.

Iran has the second biggest gas reserves in the world after Russia, but sanctions over its disputed nuclear programme and other factors have slowed its development as a major exporter.

The Islamic state is unable to access the technology it needs to build liquefied natural gas (LNG) facilities.

The offshore South Pars field, the world’s largest reservoir of gas, contains about half of the estimated 28 trillion cubic metres of the country’s gas reserves.

Mehr said CNPC officials were reportedly facing “financial problems” to provide the required capital for investment in the project.

Tehran has no major net exports partly because U.S. and UN sanctions have deterred investment by Western firms with expertise and technology.

The Islamic state has increasingly shifted to Asian countries, including China, to develop its oil and gas fields.

The South Pars reservoir is shared by Iran and Qatar. The Iranian part is divided into 24 phases.

Iran said last year production at South Pars rose by nearly 30 percent during the 2009-10 year and that the field is expected to generate income of up to $130 billion annually once all its development phases are completed. (Writing by Zahra Hosseinian; editing by James Jukwey)

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