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
Walid Khadduri

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.

Walid Khadduri is an Iraqi writer on energy affairs based in Beirut.

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