Russian Firm in $1b Oil Rig Deal With Iran

According to the terms of the contract, the Russian firm will share knowhow of rig construction with the state-run National Iranian Oil Company
An Iranian gas platform in the Persian Gulf.An Iranian gas platform in the Persian Gulf.

Iran and Russia have signed a contract worth $1 billion to build five offshore drilling rigs for exploration and production in Iran's oil and gas fields in the Persian Gulf.

The contract was signed by Ehsan Mousavi, managing director of Tasdid Offshore Development Company and Aleksandr Ilichev, head of Russia's Krasnye Barrikady in a meeting in Tehran late Saturday, IRNA reported.

The first rig is slated to be built in two years in the southern city of Khorramshahr in the opil province of Khuzestan. The Russian firm will finance 85% of the project.

According to the terms of the contract, Krasnye Barrikady will share the knowhow of rig construction to the National Iranian Oil Company.

Mousavi said cooperation with the Russian company will also lead to establishing a major center for overhaul of offshore and onshore drilling rigs in south Iran.

"Russian and Chinese companies will be involved in the initiative to establish the overhaul center," Mousavi said without providing details.

He added that the design of the rigs will be based on geological properties of the South Pars Gas Field in the Persian Gulf.

Krasnye Barrikady was established in 1886 as a shipyard but has expanded its repair and maintenance operations to production of structures and equipment for oil and gas industry, tankers and various types of vessels.

Russia's Gazprom and Agip KCO, a subsidiary of Italian energy firm Eni S.p.A., are among the clients of Krasnye Barrikady.

An affiliate of state-run Iranian Offshore Engineering and Construction Co., Tasdid is a general contractor in the oil, gas, petrochemical and power-generation industries.

Ilichev reportedly said that his company is committed to working with Iran even if sanctions are reintroduced.

"Sanctions do not have much impact on our negotiations. We are a business group and fully understand that we have to meet our obligations," Ilichev was quoted as saying by the Oil Ministry's official news agency Shana.

------- Crude Production

The deal comes as Iran plans to tap into the oil layers of South Pars—the world's largest gas field shared between Iran and Qatar in the Persian Gulf.

The country is currently drawing around 450 million cubic meters of natural gas per day from the joint field and plans to match Qatar's output by March 2017.

It is on a quest to win back the lost ground in the global oil market after international restrictions imposed over the dispute on its nuclear program were lifted in mid-January.

According to data from the state-run National Iranian Oil Company, crude exports exceeded 2.7 million bpd in July, including 700,000 bpd of gas condensates, a type of light, sweet crude extracted from Persian Gulf's gas layers.

Russia has been quick in expanding its footprint in Iran's industrial and energy projects post-sanctions.

Engineering firm Technopromexport has signed a contract for construction of four units of a thermal power plant in Hormozgan Province with a capacity of 350 MW each on a turn-key basis.

Russia's Atomic Energy Corporation (Rosatom) has also planned to complete the construction of the second and third units of Bushehr Nuclear Power Plant by 2024 and 2026 respectively. Work on the second nuclear unit may start this year, according to Russia's Energy Ministry.