What opportunities does Iran’s oil and gas industry offer to foreign investors?
Based on the field studies we already received from IOCs – about 30 reports – many Iranian oil and gasfields, greenfield or brownfield, have higher reserves and production capacity than we previously imagined. I believe NIOC will soon have to update the figures for Iran’s oil reserves, which will bring a major change to our weight in OPEC and other international agencies. Iran, together with Iraq, provides the best opportunities for IOCs.
There are many unconventional oil plays in the world, such as shale oil and gas in North America, but for conventional plays, Iran has the best potential at the moment. Our new IPC [Iran Petroleum Contract] model is solid and the IOCs understand that it establishes a good frame for a long-term, win-win partnership.
Even though we are still experiencing some problems regarding the sanctions and the US, we are receiving a lot of interest from European, Russian and Chinese companies, and also from countries such as South Korea, Japan, Singapore, India, Malaysia and Indonesia.
With our qualified labour force, service and EPC companies will support the development of the upstream industry and increase oil production in the coming decades.
How do you negotiate these opportunities with IOCs?
We were able to start negotiations with many IOCs after receiving their proposals and studies. We sometimes go through tenders, but mostly through direct negotiations, sometimes with several companies at the same time. As of today we have 10 negotiation teams for 10 different fields and have made a lot of progress.
Fortunately, the contract model is finalised. The main text, as well as 14-15 appendices, is finalised, so there is no ambiguity for foreign companies willing to enter the market. We provide them with this information through confidentiality agreements. They have time to review the information related to the reservoir, service facilities, etc. and we let them visit the sites during the MoU process.
Following this, our negotiation teams discuss the legal aspects, scope of work, financial aspects and so on. First, we negotiate the technical and phased development of the project. After finalising the scope of work for 20 years, we discuss the fiscal model, commercial terms and legal aspects.
Other [bodies] supervise these negotiations based on a bylaw that we have, and we are communicating with them to ensure that after the contract is signed there are no other concerns or questions. This is what we did for Total. There was a lot of discussion after the South Pars phase 11 contract was signed, but it was resolved. This is the procedure we follow and the IOCs are happy with that.
Because [the 10 fields under negotiation] are huge projects, IOCs also need to have consortiums with an Iranian partner. Each contract has to be signed by one Iranian company and two or more IOCs. We normally start our negotiations with the main company, which may be the operator in the future. They bring their partners into the negotiation at a later stage. We typically aim to conclude the negotiation process in a few months.
Which shared fields are the government’s priority?
Azadegan and Yadavaran. We also have the West Paydar, Azar, Aran, Cheshmeh-Khosh, Sumar, Changouleh, Yaran, Dehloran, Sohrab and Arvand fields and the South Pars Oil Layer. We further have some other important fields for which we started negotiations.
Azadegan is the major project that has gone to tender. However, the most attractive project regarding reserves quantity and quality is Yadavaran. For Azadegan, oil reserves stand at 34 billion barrels and we expect, within a 20-year development plan, 15% recovery. If we can extend the contract to 40 years, the recovery would be 25-30%.
Yadavaran is almost the same, with 31 billion barrels in reserves but a better reservoir quality, and we can expect higher productivity. Right now, for Yadavaran we have the same 15% recovery objective for a 20-year contract. The total production of each of these fields is expected to reach 600,000 bopd, for a combined 1.2 million bopd.
What other upstream opportunities exist for foreign investors?
There are other greenfield and brownfield opportunities, some of them offshore. There are Farzad-A and -B, which are both greenfields. We are negotiating with an Indian company for Farzad-B. Some companies, such as Gazprom Neft, have already made discoveries on these fields.
We also have Kish, a greenfield, and many companies want to develop it as it’s bigger than three South Pars phases and has good-quality gas. We have another greenfield reservoir, Belal, which is not that big.
Iran now has excess gas, which can be directed towards the downstream sector. Any investor in upstream gas will also have to finance downstream developments. We will sign contracts based on the IPC model for upstream developments, while downstream will be open to direct investment from international companies.
We will also support investment in LNG plants to export gas. For projects such as Kish, Farzad and others, we insist that investment in upstream has to be supported by LNG production in the midstream.
How will upstream projects be financed?
Every IPC contract will be 100% financed by the consortium members. Total, CNPC and Petropars will invest based on their respective shares. Total and CNPC will finance the project partly with their own funds and partly through credit loans.
There is another new contract model, EPC+F, that NIOC has proposed for smaller upstream and midstream EPC projects. Under this model, the consortium of EPC contractors – not the oil companies – finances about 20% of the project with their own assets and budget, 40% is funded by NIOC directly and another 40% has to be financed by the contractors through an NIOC guarantee. They can obtain financing from the National Development Fund, local banks or even foreign investors and funds.
Which EOR technologies are best suited for Iranian oilfields?
We want EOR to be a part of the commitment of the IOCs in all new contracts. However, the first wave of additional production will not be based on the implementation of EOR technology, but on the drilling of new, better-designed and better-equipped wells, with new drilling methods.
In a second phase, based on the companies’ proposals, water flooding will be introduced to increase oil recovery from 5-6% to up to 15% over a 20-year period. Over a longer period of time, other methods could include chemical injection.
To what extent can Iran’s crude oil production capacity increase?
Based on the studies that we have done in the last 15 months, we estimate that in 10 years, we can obtain 3 million bopd of additional production from the fields.
We did have this kind of record back in the 1970s, and we can come back to this figure and add another 1 million boepd of condensate. It depends on how much investment can be absorbed and how many companies will come.
If we can overcome the challenge of investment and technology, Iran is the best place in the world for new conventional oil and gas developments. Reaching even 9 million bopd is possible over a 20-year development programme. We understand there is another 100 years of work that remains to be done in Iran’s oil and gasfields.
TOGYiN features profiles on companies and institutions active in Iran’s oil and gas industry, and provides access to all our coverage and content, including our interviews with key players and industry leaders.
TOGY’s teams enjoy unparalleled boardroom access in 35 markets worldwide. TOGYiN members benefit from full access to that network, where they can directly connect with thousands of their peers.