Zanganeh Outlines Oil/Gas Plans

Zanganeh Outlines  Oil/Gas PlansZanganeh Outlines  Oil/Gas Plans

The new Iran oil contracts will require foreign oil and gas companies to either partner with Iranian firms or officially register an Iranian entity in order to operate in domestic oil and gas projects, Oil Minister Bijan Namdar Zanganeh said in his first press conference.

"A draft of new oil contracts is in final stages and will be presented to the government for approval in the near future," Zanganeh was quoted by Shana News Agency as saying.

The new contracts enhance the oil industry's "managerial capacity and allow for transfer of technology," he said without elaboration. The oil ministry, in line with the national budget law, is permitted to invest up to $100 billion in oil and gas projects to both open new opportunities to the private sector and boost privatization.

Zanganeh also highlighted the shortage of gas as one of oil ministry's major challenges since he took office in mid-2013. "The country faced an estimated 160 million cubic meter per day gas shortage, while the development of 17 phases of the South Pars gas field [in the Persian Gulf] were far behind schedule."

To overcome shortcomings, the ministry had to prioritize the development of SP phases, with Phase 12 as well as phases 15-17 in line for completion.

Phase 12 is South Pars’ biggest phase in terms of volume of activities as well as investment and production level. President Hassan Rouhani officially launched Phase 12 last March with capacity to produce 75 mcm of natural gas and 120,000 barrels of gas condensate per day.

Six refining units of Phase 12 and three offshore platforms went into operation last year besides two platforms and four refining units of phases 15 and 16, increasing gas delivery to the national gas network by 100 mcm in winter. In addition, the supply of natural gas from Phase 18 is now underway, according to the official.

Zanganeh hoped that phases 15 and 16 will start production by March 2016, expanding overall gas output by 50 mcm/d. Phase 17 is also slated to go operational by yearend with an estimated 25 mcm/d capacity. However, the development of Phase 18 could face a delay due to the failure of the Iran Marine Industrial Company (SADRA) as its contractor to fulfill development targets.

All SP phases are scheduled to be completed within three years. Phases 13-18 are now a priority, followed by phases 19, 20, and 21, according to Zanganeh. Upon the completion of seven high-priority phases in the near future, SP output will go up by nearly 170 mcm/d.

Debts to Ministry

Zanganeh announced the scandalous Iranian billionaire, Babak Zanjani, has an enormous $2.7 billion debt to the oil ministry. There are plans to cash in on Zanjani's assets and properties to recompense part of his debts, yet the value of his assets are insignificant compared to his debt to the government, Zanganeh noted.

Zanjani was arrested in September 2013 after he was accused of withholding significant amount of oil revenues meant to be channeled through his companies. The tycoon is said to be worth $13.5 billion.

Zanganeh added the Iran National Police Force (NAJA) also has paid back $60 million of its debt to the ministry, with an estimated $200 million remaining.

Rise in Output

Zanganeh reiterated that Iran has the potential to increase crude output to its pre-sanctions level. The country's oil exports have been cut by more than half to around 1.1 million barrels per day from a pre-sanctions level of 2.5 million bpd.

The minister said there is a consensus among "even the most conservative OPEC members" that crude production ceiling cannot exceed 30 million barrel per day and the volume should be cut by "at least five percent." He added that OPEC can "coordinate itself" with any increase in Iran's oil output.  Nonetheless, the minister stressed that member-states with higher production capacity have more influence on the Organization.

Zanganeh - meeting with top Chinese energy officials last week during a two-day stay in Beijing – also underlined China as Iran's strategic partner and said the two sides will maintain strong relations after lifting of sanctions. Promoting oil and gas condensate exports to China, participation of Chinese firms in Iranian oil and gas projects, and expanding collaborative research were the cornerstone of talks in Beijing.

Zanganeh also reflected on the Iran-Turkey gas dispute, pointing out Iran is ready to supply gas to Turkey at a lower price should the northwestern neighbor doubles its imports. The Turkish President Recep Tayyip Erdogan was in Tehran last week at the head of a delegation of ministers. The two sides discussed bilateral ties and signed several trade deals.