Exploration, Production Highlight IPC Conference

Exploration, Production  Highlight IPC Conference
Exploration, Production  Highlight IPC Conference

The long-anticipated framework of the new Iranian oil and gas contracts, known as Iran Petroleum Contract, was officially unveiled on Saturday after years in the making in a landmark conference.

The event brought together more than 1,300 officials and representatives from 335 companies, namely 183 domestic and 152 foreign firms from 45 countries, for the two-day event in Tehran.

Iran also lifts the curtain on 50 oil and natural gas projects worth an estimated $185 billion on Sunday, of which 20 are related to discovery and exploration while 30 are designed to boost extraction from oil and gas fields by implementing enhanced oil recovery techniques.

The conference on Saturday was addressed by senior Iranian officials, including Oil Minister Bijan Namdar Zanganeh, Vice President for Legal Affairs Elham Aminzadeh, head of the Oil Contract Revision Committee, Seyyed Mehdi Hosseini, and deputy oil ministers Rokneddin Javadi and Amirhossein Zamaninia, among others.

"It is high time to lift the cruel sanctions against Iran to prove once again that oil embargos are to the detriment of consumers and producers," Zanganeh said, asserting that crude oil should not be subject to political threats and sanctions.

He described Iran as an influential force in global energy security and stressed that Tehran welcomes "win-win cooperation and partnership" with international companies.

The oil minister added that the country is ready to develop its upstream oil sector with domestic and foreign cooperation, and calls on international investors to take on downstream projects such as petrochemical, refinery and liquefied natural gas projects.

Speaking to reporters on the sidelines of the conference, Zanganeh said Iran produces every barrel of oil at $10, adding that with current or even lower crude prices, the country's oil projects would still be attractive and profitable for foreign investors.

Brent Crude was traded at $44.87 per barrel on Friday.

OPEC member Iran currently exports around 1.1 million barrels of crude oil per day and hopes to get back to its pre-sanctions level of 2.2 million, last reached in 2012. Iran's total production now stands at 3.1 million bpd.

------- $25b FDI Target

The Iranian oil minister said the IPC conference would be "successful" if the oil and gas projects under the new contractual framework attract $25 billion in foreign investment.

"Many foreign companies, including Europeans and Asians, are eager to make investment in Iran's oil industry," he said. "We cannot say which are closer to a final deal, but Total and Eni as well as Malaysian, Japanese and Chinese (companies) are looking for investment."

Zanganeh ruled out the opposition of Iranian government to the participation of American firms in the IPC convention and referred to strict regulations of the US government that prohibit American corporations from doing business with Iran.

The conference is the second event within a week that gathers major international energy players in Tehran, as the Persian Gulf country is preparing to reach out to the international community ahead of the prospective lifting of sanctions by early January.

Last Monday, President Hassan Rouhani hosted eight heads of state during the Third Summit of Gas Exporting Countries Forum in a clear message that Tehran is ready to play a bigger role in the global natural gas market, along with the biggest players in the industry, including Russia and Qatar.

Sepidar Karimi, an energy analyst based in Tehran, said the convention of the biggest global players in the oil and gas industry in Iran is an "unprecedented event in Iran's recent history".

However, referring to some of the details of the new contracts, she said she expected a "more comprehensive presentation" of the IPC, as Iranian officials had already outlined some of the terms of the new contracts over the past few months.

"Transfer of technology to Iranian partners is an integral part of the new contracts," she said.

------- Restoration of Relations

The Islamic Republic's revised contracts are an effective means of restoring relations with the industrial world, head of the special Oil Contract Revision Committee said on Saturday.

"Lifting the curtain on the framework of new oil and gas contracts, unveiling investment opportunities in oil and gas sectors and elaborating on domestic capabilities are among the most important objectives of the conference," Seyyed Mehdi Hosseini added.

The Islamic Republic's revised contracts are aimed at accelerating the development of oil and gas fields, making up for years of underdevelopment in joint fields and employing advanced technologies in the energy sector.

According to the official, implementation of the development plans is in line with "Resistance Economy", a policy proposed by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei to counter the sanctions, promote domestic growth and reduce consumption.

Expanding oil and gas production capacities and having an active presence in international arenas are necessary under the current circumstances.

Elaborating on the IPC working group activities, the official added, "In the first phase, after conducting field and scientific researches and gathering data from the oil contracts used in 33 oil producing states, a conceptual model was developed. Furthermore, the performance of different domestic and international companies during the last 20 years was analyzed.

"The second phase comprises two parts, the first of which was preparing a draft to get the Cabinet's approval," he said, noting that the second part was the briefing sessions held under the supervision of President Hassan Rouhani's economic consultants.

Pointing to the last phase, planned to be undertaken in Tehran conference, Hosseini said political and national determination are needed to finalize the plan.

The official believes that transparency of the contract' details and providing satisfaction for the contractors are among other criteria to guarantee the successful implementation of IPC.

------- 28 New Projects

Beside the 50 oil and gas projects due for unveiling on Sunday, Tehran is planning to line up 28 new projects worth $30 billion by January 2016, Rokneddin Javadi told a news conference on Saturday.

The investment opportunities include 18 exploration and 10 development projects.

Javadi pointed to an open competition for the new oil and gas tenders, and said Iranian companies will be awarded the projects if they bid higher than their foreign rivals.

"The National Iranian Oil Company officials will do their best not only to elaborate on IPC's technical details but also to resolve all ambiguities," Rokneddin Javadi told a news conference on Saturday.

"All new proposals aiming at clarifying and amending contracts are welcome, as we believe IPC may require improvement."

Referring to buyback contracts whose evolution took three years, the official said IPC is not an exception and its completion might require time as well.

Elaborating on investment opportunities, Javadi said, "Exploratory blocks, NIOC's projects and boosting oil and gas production by applying enhanced oil recovery methods are among unique opportunities to be unveiled in the conference."

The official added that three projects related to Farzad B, Yadavaran Phase 2 and North Azadegan development were eliminated from the list of available projects for foreign contractors and will be put out to tender in future.

Referring to 345 billion barrels of oil and gas that are recoverable from Iran's hydrocarbon reserves, Javadi noted that less than 30% of resources have been exploited so far and IPC is an ideal opportunity to take advantage of such a great potential.

"Iran's recoverable oil reserves stand at 158 billion barrels, accounting for 10% of the world oil reserves," he said, stressing that the natural gas potential is much higher.

In other words, 18% of the world's gas reserves, amounting to 34 trillion cubic meters, are in Iran.

Javadi believes that Iran's oil production should exceed 25 million barrels a day in the next 25 year so that this country can retain its share in the energy market.

"Plans have been made to increase gas production to 1.4 billion cubic meters by the end of the sixth five-year economic development plan (2016-20) that is an 80% rise compared to that produced in the Fifth Five-Year Economic Development Plan (2011-16), standing at 750 mcm," he said.

"Oil production in this period will reach 4.7 million bpd."

According to the official, 300 wells must be drilled with the help of 650 rigs by the end of the sixth plan, which will help create many jobs in this field.  

------- Eliminating Investment Risks

The termination of sanctions imposed on the oil and gas sector by the West over Iran's nuclear program will eliminate the risks of investment for international oil giants willing to put their money into IPC projects, Amirhossein Zamaninia, deputy oil minister for international affairs, said on Saturday.

Stressing that sanctions had become an impediment to investment in Iran, the official said, “Implementation of the recent international agreement on Iran's nuclear program, officially titled the Joint Comprehensive Plan of Action, will pave the way for further investment in Iran.”

Underscoring the fact that sanctions removal will be under Iran's close observation even in the post-sanctions era, Zamaninia said, "As soon as sanctions become a thing of the past, European states will not only start negotiations with Iranian oil and gas companies, but also provide them with financial incentives."

"Despite the sharp fall in oil and gas prices, Iran is still the safest country for investment in the Middle East," he said.

Aminzadeh said one of the key advantages of investment in Iran's energy projects is its special laws that guarantee the return of investment.

"[The laws] provide and guarantee sustainable security, successful execution and timing for projects," she said.

--------------- Principles for Future Investments

Zanganeh laid out five key principles for the country's post-sanctions plans in upstream oil sector: Expanding exploration operations and boosting oil and gas production capacity (particularly from joint fields); raising extraction rate from oil and gas reserves on a constant basis; adopting the latest knowhow; attracting foreign investment to develop the oil industry; and supporting domestic private sector companies in exploration projects to help develop oilfields.

--------------- Convention of World Majors

Some of the major companies at the IPC conference are: Russia's Gazprom Neft, Lukoil and  Rosneft, Italy's Eni and Saipem, China Petroleum Pipeline Engineering Corporation and the Beijing-based Sinopec, South Korean Daewoo International, LG, Samsung C&T Corporation and Daelim Industrial, Mitsubishi Corporation of Japan, Royal Dutch Shell, BP, Indian Oil Corporation and ONGC Videsh, Kuwait Energy, Danish business conglomerate Maersk, Hungary's MOL Group, Madrid-based Repsol, Oman Oil Company Exploration and Production, Malaysia's state-owned Petronas, Polish Oil and Gas Company, the US-based Schlumberger (the world's largest oilfield services company), Germany's Siemens, France's Technip, Total S.A. and Engie, United Energy Pakistan, Georgia Oil and Gas and Norway's Statoil and Global Geo Services.