Iran launches first post-sanctions bidding round
Oil Ministry hopes to sign at least $10 billion worth of energy deals by April 2017 as it launches new Iran Petroleum Contract.
An Iranian man works at an oil facility in the Kharg Island, on the shore of the Gulf. AFP / STR
2016/11/06 Issue: 80 Page: 20
The Arab Weekly
Beirut - The state-owned National Iranian Oil Company (NIOC) called on international oil companies to participate in a pre-qualification process for new upstream tenders it plans to launch. NIOC plans several rounds of tenders for exploration and production of oil and gas projects, the Oil Ministry news service Shana stated.
The Oil Ministry said it hopes to sign at least $10 billion worth of energy deals by April 2017 as it launches the new Iran Petroleum Contract (IPC), which replaces a buy-back model contract. The IPC was approved in September after much wrangling within the Iranian political hierarchy.
The Islamic Revolutionary Guards Corps (IRGC) was opposed to the IPC, which its leaders said would threaten the elite unit’s extensive economic interests. Brigadier-General Ebadollah Abdollahi, head of the IRGC’s industrial conglomerate Khatam al-Anbiya, said: “No one is against foreigners coming. We can have some cooperation with them,” he said. “(But) it is a disgrace to be under the hands of foreigners when we have so many educated young people.”
Khatam al-Anbiya, Iran’s largest industrial contractor, opposed plans by the Oil Ministry to put international firms in charge of major projects.
Abdollahi said the IRGC was “ready to cooperate with foreign investors, provided that the engineering and implementations be undertaken by Iranians”.
The return of international oil companies to Iran would encroach on the IRGC’s economic interests.
“The government is in need of much cash to finance development projects. Oil rent is the most important such source that is available to Iran,” First Vice-President Eshaq Jahangiri said during a mid-October industry conference in Tehran.
“Without oil revenues, Iran’s development will not be possible. Nothing is more important than oil and natural gas for Iran,” he said.
The model contract has been amended to accommodate the views of both moderates and conservatives, as well as to ensure that it will be accepted by international oil companies. The United States has kept some sanctions intact against the IRGC, which deters international companies from having business dealings with it.
NIOC has proposed 50 upstream development projects for possible involvement by international oil companies in accordance with the new IPC. Priority will be given to fields that share oil and gas reserves with neighbouring countries. High on the list of the border fields is Phase 2 of the 25 billion-barrel South Azadegan oil field, 80km north of Ahwaz, which shares a reservoir with Iraq’s giant Rumaila oilfield. France’s Total and Japan’s Inpex have expressed interest in the approximately $10 billion development project.
NIOC has also initialled a Memorandum of Understanding with the Russia’s state-owned firm Tatneft for the further development of the Dehloran oilfield, which is a mature field on the border with Iraq. Dehloran output is 24,000 barrels per day (bpd) from 16 wells. The deal is to carry out an enhanced recovery programme to increase output to 40,000 bpd and gas production from 1 million cubic metres per day to 2.2 million cubic metres per day.
Iran’s focus on the speedy development of border oil and gas fields could be a source of new conflict with neighbouring countries. Most of the borders lack clear demarcation. Few joint development agreements exist for border fields, which could lead to misunderstanding and tension or possibly armed conflicts.
Iran’s post-sanctions drive to sign agreements with international oil companies has included downstream projects for the development of Iran’s petroleum industry.
Since the lifting of international sanctions last January, six agreements have been signed: Denmark’s Haldor Topsoe for licensing and engineering equipment for a methanol plant; Total, for an ethane cracker feasibility study; South Africa’s PetroSA for gas-to-liquids (GTL) research cooperation; Germany’s Linde for olefin feed; British-Dutch Shell for ethane and GTL feasibility study; and Japan’s Sojitz Corporation for a methanol to propylene plant feasibility study.