Sinopec Advances Iran Oil-Field Plans Despite Canceled China Deal

China Petroleum & Chemical Corp., or Sinopec, is pushing to start a new phase in an Iranian oil-field development, a plan Iran says it is likely to approve, according to people familiar with the project.

The push is part of a broader attempt by China and Iran to mend fences after the cancellation of a separate project.

Chinese state-owned company Sinopec is taking steps to start development activities in the second phase of the Yadavaran oil field, which is set to start next year. Delegates from Sinopec are due to travel to Tehran next month to discuss the plans, according to two people familiar with the company's Iran operations. The topics will include ordering equipment such as pipes.

Sinopec didn't return a request for comment.

In late April, Iran canceled a $2.5 billion deal with state-owned China National Petroleum Corp. following repeated delays at a giant oil-field project. The cancellation triggered speculation among Iran oil experts that privileged ties between Tehran and Beijing may be at risk.

The new phase at the Sinopec-operated Yadavaran field will boost production there by about 110,000 barrels a day from current levels—roughly equivalent to output from a small producer like Sudan, the people familiar with the operations said. The field currently produces 25,000 barrels a day—a level these people expected to double soon—but the second phase would boost output to 135,000 barrels a day, the people said.

The project—awarded to Sinopec in 2007 and reportedly worth $2 billion—is considered a priority because the Yadavaran field straddles a border with Iraq, which is already advanced in developing its side of the reservoir.

The company's progress in the field meant it was likely to keep its project, said Ali Majedi, Iran's deputy oil minister, in an interview with The Wall Street Journal. "It is quite possible we will continue with the same company for the second phase of Yadavaran. We are quite satisfied with their work," he said. Mr. Majedi said oil minister Bijan Zanganeh is set to discuss the matter during a trip he is undertaking in China.

The news comes as China imported a record volume of Iranian oil in April—just as Iran's overall oil exports declined. Chinese companies are frequently accused by Iranian oil officials of charging hefty amounts for works that tend to be delayed or suffer from operational mistakes. Even when companies keep their contracts, they come under unprecedented pressure to deliver.