Energy Officials Reflect on IPC Confab

Energy Officials Reflect on IPC Confab
Energy Officials Reflect on IPC Confab

Iran unveiled last week a new framework for its oil and gas contracts in a much-anticipated conference that brought together hundreds of domestic and international oil and gas companies in Tehran.

The Persian Gulf country also unveiled 52 projects for development and exploration of its rich hydrocarbon fields in a two-day event that drew generally positive responses from Iranian and foreign officials.

Tor Erling Gunnerod, an official from Norwegian drilling company MHWirth, said on the sidelines of the IPC conference in Tehran that the event has spurred the company to look at Iran's energy sector as a hotspot for investment.

"The conference reassured us of making investment in Iran," he said, adding that MHWirth was active in the Persian Gulf country before the sanctions and is willing to resume operations.

Stephane Michel, head of the Middle East exploration and production division of oil and gas company Total, said the French major is keen to be actively involved in both gas and oil projects in Iran, but it is now assessing the bevy of investment opportunities in post-sanctions Iran.

Bjorn Arne Lundblad, vice president of business development at INTSOK—a consortium of Norwegian oil and gas companies—said Iran is one of the more attractive markets for oil and gas investment.

However, he called for more incentives to encourage foreign investment in oil and gas exploration and development projects.

Saeed Hafezi, managing director of Iranian Offshore Oil Company, said the new Iran Petroleum Contract can attract foreign investment in oil and gas projects several times more than the so-called buyback contracts that were in place for the past 20 years.

Hafezi added that the conference was a success in unveiling the new contractual framework for oil and gas projects, lining up investment opportunities for global investors and demonstrating the potential of domestic contractors.

The buyback contracts were unpopular with multinationals even before the introduction of tougher US and EU sanctions against Tehran in 2012. The model was largely criticized for its fixed scope of work, capital cost ceiling, remuneration fee and defined cost recovery period.

But the IPC offers more flexible and attractive terms of cooperation, allows contracts to last for up to 25 years and puts no ceiling on capital expenditure.

Head of the Oil Contracts Revision Committee Seyyed Mehdi Hosseini said international companies were thoroughly briefed on the details of the new contractual framework during the two-day event that gathered Lukoil, BP, the Royal Dutch Shell and Total, among other heavyweights.

Hosseini said Tehran was prepared to hold the IPC conference sooner, but the convention was delayed by international restrictions.

A second conference is scheduled to be held in London on February 22-24 for a thorough presentation of Iran's multibillion-dollar oil and gas projects.

"Major global oil companies are expected to embrace the new projects due to the low risks of investment in Iran," he added.

More than 1,700 people attended the conference and around 300 prominent individuals worldwide tracked the conference online.

The new contractual framework has its drawbacks and weaknesses, but it is designed in a way that would be to the detriment of foreign contractors in case of unexpected circumstances, such as the reimposition of US and EU sanctions, Oil Minister Bijan Namdar Zanganeh said in a statement last week.

Gholamreza Manouchehri, chief executive director of Iranian Offshore Engineering and Construction Company, said the new contracts guarantee a place for domestic firms next to foreign contractors in oil and gas projects.

According to oil officials, up to 60% of oil and gas operations after the lifting of sanctions can be handed over to Iranian companies.