East Asian Companies Briefed on Iran Petroleum Contract

Representatives of several integrated oil and gas companies from East Asia were briefed on the new model of Iran's oil contracts in Tehran last week, the Oil Ministry's news service Shana reported Sunday.

The unnamed companies from China, Japan, Malaysia, Indonesia and Thailand learned about some of the financial and legal terms of the Iran Petroleum Contract (IPC), which is designed to bring back multinationals to Iran's resurgent energy sector. 

The presentation also included a Q&A session.

Earlier this month, the National Iranian Oil Company approved 29 foreign companies for bidding in several dozen oil and gas tenders.

The list consisted of several Asian corporations, including China National Offshore Oil Corporation (CNOOC), China National Petroleum Corporation (CNPC), Sinopec Group, Indonesia's state oil and gas company Pertamina, Malaysia's Petroliam Nasional Berhad (Petronas), Japan's Mitsubishi Corporation, Inpex, Japan Petroleum Exploration, Mitsui Group and Itochu Corporation, as well as Posco Daewoo and Korea Gas Corporation (KOGAS) and Thailand's PTT Exploration and Production Public Company Limited (PTTEP).

NIOC says a second list of qualified companies will be made available soon. 

This was the second such briefing on the IPC framework for foreign oil and gas firms. 

In November, a 35-member delegation of Russian energy companies, including Lukoil, Gazprom, Rosneft, Gazprom Neft, Zarubezhneft and Tatneft, got a first-hand glimpse of IPC in a one-day presentation in Tehran.

Efforts to make known the terms and conditions of the new contracts follow last year's attempts to introduce IPC at a planned London conference. 

But that conference, scheduled to be held in February, was called off amid growing opposition of some domestic groups who claim the IPC is "a major concession" of Iran's hydrocarbon wealth.

Tehran hopes to hold the first international oil tender in the first quarter of this year. The giant South Azadegan Oilfield near the Iraqi border is said to be the first project to be tendered this year, with household names such as French energy giant Total and Royal Dutch Shell eying the field's development rights.

Noureddin Shahnazizadeh, the head of Iran's Petroleum Engineering and Development Company, said this month that Japan's Inpex is in a strong position to win the South Azadegan contract. Speculations also point to the possibility of forming a consortium to develop the coveted oilfield.

 IPC is aimed to be a more attractive alternative to the past buyback contracts that were the main contractual framework in key Iranian energy projects for almost two decades. 

The new contractual model offers a substantial reward for high-risk projects. Unlike the short expiry of buybacks, IPCs offer contract durations of 20-25 years, allowing for much longer cost recovery after first production. This allows foreign companies a higher degree of certainty and incentive to invest.