Baku, Azerbaijan, August 30
Dalga Khatinoglu – Trend:
Despite serious criticism of hardliners, Iran’s government plans to issue the first tender on oil and gas projects based on new-designed contract model, called Iran Petroleum Contract (IPC) within a month.
Iran expects to attract $10 billion by March 2017 by sealing three contracts based on IPC, Ali Kardor, the managing director of the National Iranian Oil Company (NIOC) said Aug 30.
Iran has introduced the IPC last December. It offers 50 upstream oil and gas projects for foreign partners on new, more attractive terms than the previous buyback contracts.
Despite the old contracts, IPC allows foreign companies to sign long-term contracts with Iran (20-25 years) and receive a percentage of produced oil as long as the field is active.
It would encourage the foreign company to increase the field's recovery rate to receive more oil in the long term.
Global investment on upstream oil and gas sector doubled during 2000-2013 to about a half of trillion USD per year, but it has halved since mid-2014 immediately after oil price started to plunge.
Even, during 2015 the renewables surpassed upstream oil and gas in attracting global investments by standing at $286 billion.
In this situation, Iran needs more smooth conditions for foreigners to compete with other producers, especially around the country.
|
The offered 21 gas and 29 oil fields based on IPC |
||||
|
Gas fields |
Gas in place Trillion cubic feet |
Current Production Mcf/d |
Total Estimated Production Mcf/d |
Estimated Condensate Production b/d |
|
226.42 |
1023 |
14,416 |
110,610 |
|
|
Oil fields |
Oil in place billion stock tank barrels |
Current Production b/d |
Total Estimated Production b/d |
Associated gas production mcf/d |
|
214 |
217,000 |
To be proposed by contractor |
7,000 |
Iran needs to change old terms
About 80 percent of Iran's active fields are in their second half-life and lose 8-12 percent of production annually. For slowing this pace, Iran should have re-injected about 1270 billion cubic meters of gas (bcm) during 1990-2015, but only did about 580 bcm.
Currently the country should be re-injecting 100 bcm per year into the oil fields to maintain the barrels, but the country only re-injects about 30 bcm, due to gas shortage.
As for the new fields, Iran eyes attracting $100 billion in upstream oil and gas projects by 2021. But foreign companies are reluctant to the terms of old contracts that Iran offers.
The legal terms of IPC is very similar to Iraq's new contracts. Iraq could attract tens of billions of investment based on its new contract model which allows a foreign company to receive a fixed revenue for producing each barrel as long as the production continues from the field.
Iran also offers a foreign company to have a share in the output instead of cash payment in the long term (20-25 years) in IPC.
Iraq has increased its output from 1.5 million barrels per day (mb/d) in 2006 to 2.5 mb/d in 2010 and increased the volume to the current 4.3 mb/d level.
Iran's major goals are improving the recovery rate of its oil fields which naturally stands at 23-25 percent as well as protective production. The long term contract as well as sharing the contractor in the output would encourage the foreign partner to pay more attention to recovery and protective production issues.
The foreign company also has to choose an Iranian partner, and the leadership of the project would change between them in a certain periods. It would help Iranian companies to be familiar with project development aspects and technologies.
However, it seems that Iranian hardliners have decided to prevent the implementation of IPC, arguing that it is against national interests. Their argument is that the foreigners would get their hands on Iran's oil and gas reserves, based on new contract model.
This is not true, as foreign companies would take stock in the produced oil, not the oil reserves, and this is not against the law.
Dalga Khatinoglu is the head of Trend Agency's Iran news service, follow him on Twitter: @dalgakhatinoglu