Gholam-Hossein Nozari, managing director of the National Iranian Oil Company (NIOC), told the ISNA news agency the two sides were still negotiating the return which Sinopec should receive on its investment in the field.

Yadavaran, in southwest Iran, is expected to produce 300,000 barrels per day, about the same amount Iran now exports to China.

"After the last round of negotiations with the Sinopec Company for developing the Yadavaran field, all items of the contract have been finalized except the discussion over the rate of return," Nozari was quoted as saying.

Nozari, whose comments were also carried on the Oil Ministry"s website PIN, said Royal Dutch Shell Plc was interested in participating in the development of Yadavaran.

"The National Iranian Oil Company can sign a contract with Shell and Sinopec as a joint company or it can sign the contract with Sinopec and Shell can enter negotiations with Sinopec," PIN quoted Nozari as saying.

Sinopec Group, China"s second-largest state-run oil and gas firm, agreed in October 2004 to take the lead in developing Yadavaran and to buy 10 million tons of liquefied natural gas (LNG) a year for 25 years.

The National Iranian Tanker Company and Sinopec also plan to set up a joint firm for transporting liquefied natural gas from Iran’s North Pars gas field.

Mohammad Suri, director of the Iranian state company, said the two parties would have equal shares in the planned venture and that it would be registered soon.

Iran sits on the world’s second largest gas reserves after Russia.

PIN/REUTERS