Italy’s largest oil and gas group signed a memorandum of understanding on Tuesday with the National Iranian Oil Company (NIOC) to explore a potential investment in Kish gas field in the Persian Gulf and the third phase of development of the Darquain oilfield in southwest Iran within the next six months.
Iran had signed provisional agreements at the end of last year on the two fields with Royal Dutch Shell, Russia’s Gazprom, The Philippines’ PNOC and an Iran’s Ghadir Investment Company.
The agreement on June 20 was signed by Gholam-Reza Manouchehri, NIOC deputy managing director of for engineering and development and Seger Willem Arie Hoijtink, Eni's vice-president for international upstream projects. Other officials present at the ceremony were Ali Kardor, CEO of NIOC, and Nouroddin Shahnazi, CEO of Petroleum Engineering and Development Company (PEDEC).
Eni is no stranger to Iran's petroleum industry. The Italian energy company first came to Iran in 2000 and completed phase one and two of Darquain oilfield but quitted development of the third phase in 2011 due to international sanctions imposed on Iran over its nuclear program.
Eni has already led oil projects in Egypt and the Mediterranean with Manouchehri saying that the company has registered significant records in rapidity and quality in these countries.
Now Iran hopes to enhance oil production from Darquain from 160,000 b/d to 220,000 b/d, which would require an estimated $1.5 billion in investment. In the third phase of development of the oil field, Ilam, Sarvak and Fahlyan layers will be developed.
6 Months for Feasibility Studies
Manouchehri said Eni would have six months to complete its technical surveys on Kish and Darquain fields and submit its conclusion to NIOC.
"We hope to be able to achieve an acceptable basic development plan based on the findings of studies we receive from companies," he said.
"Based on these MOUs, domestic and foreign companies will conduct their studies on the development of oil and gas fields free of any charge," he added.
Manouchehri said an advantage of signing MOUs with a variety of domestic and foreign companies to study oil and gas fields was the compilation of various plans. "That would help us compare the results of studies with each other. Furthermore, valuable projects have so far been submitted to NIOC," he added.
Manouchehri said NIOC had conducted its own independent studies separately in order to have a more realistic view of oil and gas fields, rate of recovery from them and their lifecycle.
Cutting Edge Technologies a Must
Under Iran's new model of oil contracts, IPC, NIOC insists on improved oil recovery and enhanced oil recovery (IOR/EOR) and expects IPC to bring about oil and gas recovery enhancement.
Manouchehri said NIOC wants the use of modern technologies in studying the field in order to "have maximum efficiency in recovery from the fields."
"We expect the use of conventional technologies which are available in the world in order to stabilize Iran's oil and gas reserves because these deposits are Iran's accumulated wealth and should we fail to recover them through IOR/EOR we will lose these resources in coming years," he added.
Manouchehri said under IPC deals, Iranian E&P companies would join foreign companies in developing oil and gas fields.
"In case we reach a final conclusion in IOR/EOR, Iranian companies that are now serving as partners to foreign companies in oil and gas projects will themselves become developer of projects," he added.
Eni Seeks Comeback to Iran
Arie Hoijtink referred to Eni's cooperation with Iran in the past in developing Siri and Darquain fields, saying the Italian company had accomplished all its projects in Iran.
"We expect to submit our study findings to NIOC in six months," he said. "On this basis we are trying to acquire developed technologies in order to make maximum profit from the fields."
Manouchehri said Kish field was selected due to Eni's return to Iran's gas market, adding that the Italian group was attentive to gas and gas production.
NIOC to Regulate Oil Export Mix
Kardor said plans were under way to regulate Iran's crude oil exports mix.
"By regulating crude oil exports, the amount of oil delivered to various countries will be crystal clear," he said. "That would help create balance in the supply of oil to different countries and will avert sudden changes in the trend of exports and will prevent the country's dependence on oil demand by certain companies."
He said that Iran had cut oil exports to India, while in parallel boosting delivery to Western countries.
Kardor said Iran's oil production capacity stood at 4 mb/d, noting that Iran's oil production had not declined.
He said that European countries received 50% of Iran's crude oil exports in May.
SP11 Contract Text Finalized
Kardor said the text of agreement for the development of Phase 11 of South Pars with a consortium of France's Total, China's CNPC and Iran's Petropars had been finalized.
"We are waiting to receive some permits and arrange the presence of senior managers of companies to attend the ceremony of signing the contract," he said, adding that the agreement would be signed before the administration of President Hassan Rouhani mandate ends.
Kardor said Total had sent a team to Iran to finalize the text of the South Pars project. "Signature of this contract has nothing to do with political issues and Total is interested in signing the agreement."
Azadegan Tender Unlikely Under Current Administration
Kardor also referred to a long-awaited tender rounding for Azadegan oil field which Iran shares with Iraq.
"Instead of sending tender papers to all companies, a letter was sent to them so that companies willing to bid for Azadegan would express their readiness. After it has been finalized limited bidding round will be held," he said.
Kardor said this process would take several weeks, adding: "Furthermore, some bidders have not already signed MOUs with NIOC and naturally their technical studies will last months. It is unlikely that the contract for Azadegan field would be signed under this administration."
Maersk Wooed for SP Oil Layer
Kardor said NIOC was in talks with Denmark's Maersk to develop the oil layer of South Pars gas field.
"The technical model offered by Maersk is under review by NIOC experts," he added.
He said Iran was seeking to deplete the reservoir of the oil layer of South Pars as it is jointly owned by Iran and Qatar. "That must be done more rapidly and we have asked Maersk to take this issue into consideration," he added.
Kardor said no other foreign company than Maersk had shown willingness to develop the oil layer of South Pars.
"Signing a contract is something and technical issues of recovery from the field are something else. Since this field is jointly owned and Iran insists on its faster depletion we are willing to see recovery from this field happen more rapidly," he added.
He also referred to negotiations with India for the development of Farzad-B gas field, saying: "In case the financial model presented by the Indians turns out to be commercial we will review it. Meantime, we are drawing up EPC and EPCF packages to develop Farzad-B. Now if we reach agreement with the Indians sooner we will welcome it; otherwise, we will not stop developing the field and we will go another away."
Asked if Shell and Eni were likely to team up to develop Kish gas field, he said: "Since both companies enjoy market shares in LNG and gas export I don't think they would like to form a consortium to develop the field."
Joint Committees with Qatar, Iraq
Kardor also said Iran was cooperating with neighboring countries for maximum efficient recovery from jointly owned fields.
"Qatar demanded that a joint committee be set up and the first meeting of the committee has been held. Also a joint meeting has been held with Iraq," he said. "Iran welcomes cooperation in this regard because both sides will benefit from such cooperation."
Kardor said one reason for Qatar's request for the establishment of a joint committee was that Iran had reached the same level of extraction from South Pars.
"Maybe before Iran had raised its production capacity in South Pars gas field and Iran was behind Qatar they would not welcome holding such meetings, but now Iran is in a strong position and its production capacity has increased. Therefore, both sides will benefit from holding such meeting," he said.
Courtesy of Iran Petroleum
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