Iran: Prospect of Attracting $15b in Energy Finance

The $5 billion gas deal reached with Total S.A. last month set a new tone for Iran's energy industry and the country is now poised to seal new oil and gas agreements worth three times the gas deal with the French major.

"The deal with Total to develop Phase 11 of the South Pars Gas Field has laid the groundwork for other projects. It can be used as a model for future deals," Gholamreza Manouchehri, deputy for development and engineering at the National Iranian Oil Company, was quoted as saying by IRNA.

"There is the prospect of attracting up to $15 billion in new investments by the end of the present [fiscal] year" in March 2018, he added.

President Hassan Rouhani and his administration hope the South Pars deal with the French supermajor—the first with a top-flight western company in the energy sector after last year's lifting of sanctions—will usher in a new wave of foreign investments in the energy-rich nation that is short on cash and cutting-edge know-how to develop its oil and gas fields.

SP Phase 11 is also the first deal signed within the framework of Iran Petroleum Contract, Tehran's new model of contracts for oil and gas projects that entails more appealing terms for foreign companies.

The French company will collaborate with China National Petroleum Corp and Iran’s state-owned firm Petropars to produce 2 billion cubic feet, or 56 million cubic meters per day of natural gas from Phase 11 of the joint gas field.

NIOC is now taking steps to hold an international tender for Azadegan, a huge oil reservoir at its border with Iraq, under the IPC framework.

"The tender is in the administrative process and will be finalized by the yearend," Manouchehri said without elaboration.

Total, Japan's Inpex and Malaysia's Petronas are frontrunners in the race for Azadegan development rights, having already submitted their findings along with development proposals for the giant oilfield, which is divided into the northern and southern sections.

Manouchehri underlined the development of South Pars oil layer as NIOC's other priority project. 

Iran began to draw crude oil from South Pars in March. The oil layer is located 130 kilometers off Iran's coast in the Persian Gulf with an estimated 7 billion barrels of oil in place. 

NIOC is in negotiations with Denmark's Maersk Oil on developing the second phase of South Pars oil layer in an effort to lift production to as much as 150,000 barrels per day from the present 25,000 barrels daily.

Petrochem Investment

The National Petrochemical Company is close to finalizing $5 billion worth of petrochemical projects.

"We have signed $10 billion worth of memoranda of understanding in the petrochemical sector post-sanctions … $5 billion of which are expected to be finalized in the near future," Hossein Alimorad, director of investment at NPC, was cited as saying by NIPNA.

Alimorad said three European companies will make the new investments without revealing their names.

Shell and Total are believed to be close to final agreements to construct petrochemical plants in Iran.

Total has reached a preliminary agreement to build three petrochemical plants, with a total capacity of 2.2 million tons in a deal that, if finalized, could see the French oil major investing up to $2 billion in Iran.

Shell also signed an agreement with NPC last year on expanding cooperation in the key petrochemical industry. 

The Anglo-Dutch company has agreed to invest $350 million in a major petrochemical project in Hamedan Province, but analysts say its venture in Iran's petrochemical sector could soar to as much as $6 billion.