Iran and China Inching Closer

Iran and China have advanced in negotiations for the sale of $20 billion worh of LNG to China. In what could be the largest Iranian energy deal since 1996, Tehran has agreed in principle to sell $20 billion worth of LNG to China over the next 25 years. The two countries, ignoring U.S. energy sanctions on Tehran, have signed a memorandum of understanding that envisions the start of LNG supplies in 2008.

Under the proposed arrangement, the Beijing-based, government-sponsored oil trading company, Zhuhai Zhenrong Corp., a spin-off of China's defense and missile contractor, China North Industries Corp., would begin importing an annual 2.5 million metric tons of Iranian LNG. That figure would increase to five million tons annually starting in 2013.

Iran has reportedly finished engineering design for the project that is going to make the contracted LNG delivery to China.

Tenders for the project have been issued to bidders, and the current estimate for the start of production is 2008.