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I I r r a a n n E E c c o o n n o o m m y y U U p p d d a a t t e e
Issue 119/2016 – Tuesday November 8th Content
Iran signs first oil deal with IOCs under IPC terms post-sanctions
Egyptian Petroleum minister may visit Tehran to discus oil purchase deal
British Petroleum and NISOC negotiate developing four Iranian oil fields
Iran signs first oil deal with IOCs under IPC terms post- sanctions
Reza Zandi, an energy columnist for the reformist daily Shargh wrote this morning that: on the same day that Americans go to the polls to elect their president, representatives of the French Total, Chinese CNPCI, and Iranian Petropars will go to the
Guesthouse of the Ministry of Foreign Affairs to sign $4.8 billion Heads of Agreement (HoA) to develop South Pars phase 11 (SP11). The HoA with giant oil companies, according to Zandi, is signed after several disputes in Iran on the IPC contracts.
The author argues that this signals an important message to
Washington. “This is reminiscent of the experience of the former Iranian reformist government (1997-2001), when while the US Congress was busy with imposing sanctions against Iran’s petroleum industry, the then government held intensive negotiations and formed a consortium comprising Total, Petronas (Malaysia), and Gazprom (Russia), tasked with developing South Pars phases 2
and 3.” This way, argues the author, the then government distributed sanctions’ pressures between the Western and Eastern companies. “Today, this is
happening again but with the difference that Chinese have replaced Russians, and the local company Petropars has got experienced enough to replace Malaysian Petronas.”
That said, “Signing the HoA today will convey this direct message to the US that no matter who is elected as the next US president, the Western and Eastern
companies have already chosen their own way for investment in Iran: A way that even if gets hard, the harder would be retuning back from that,” wrote the Shargh daily columnist.
Tasnim News Agency wrote that according to the HoA signed this morning, in the first stage, a $2 billion equivalent worth
investment will be made for launching gas production
platforms and in the second stage, investment will be made for installing gas compressor facilities.
70% of the equipment is supposed
to be manufactured in Iran and also, all the sea bed pipeline laying, building wellhead platforms and gas compressor manufacturing should be carried out in Iran. The initial production of the project will become
operational in 40 months since the project starts, and the
reimbursement period will be 10 years and costs will be recovered from the initial gas production, Tasnim News Agency wrote.
Amir-Hossein Zamani-Nia, Petroleum Minister’s deputy for International & Commercial Affairs told the Financial Times today that
“This is an icebreaker and we shall see more multi-billion-dollar oil and gas contracts with other companies including Russians and Europeans soon.” “The next agreement might be in a few weeks,” he added.
The official website of Total has published more details and wrote a few minutes after the end of the signing ceremony today that Total will operate the SP11 project with a 50.1% interest alongside
Petropars (19.9%), a 100%
subsidiary of NIOC, and the
2 Chinese state-owned oil and gas
company CNPC (30%). According to the website of Total, “under the terms of the HoA, NIOC and the project partners will conduct exclusive negotiations to finalize a 20-year contract in accordance with the technical and economic terms established in the HoA, within the framework of Iranian Petroleum Contract (IPC) recently approved by the Iranian
Parliament.”
The website explains some details and wrote that “The SP11 project will be developed in two phases.
The first phase, with an estimated total cost of around $2 billion equivalent, will consist of 30 wells and 2 wellhead platforms
connected to existing onshore treatment facilities by 2 subsea pipelines. At a later stage, a second investment phase, involving the construction of offshore compression facilities, will be launched once required by the reservoir conditions.”
Gholamreza Manouchehri, NIOC deputy director for development
& engineering affairs confirmed today that Total will take the leadership of the consortium and argued that this French company believes that a 1.8 billion cubic feet per day production of gas from this field will be realized in 20 Year. According to Mehr News, the HoA was signed today in front of Petroleum Minister Bijan Zangeneh, NIOC Managing
Director Ali Kardor, and Petroleum
Minister’s Deputy for International
& Commercial Affairs Amir- Hossein Zamani-Nia. Patrick Pouyanné, chairman & CEO of Total was not present in Tehran and the agreement was signed by his deputy.
Of note, the SP11 is the only phase among 24 phases of South Pars gas field which has remained untapped. In 2007, NIOC almost finalized negotiations with Total for developing the field but the project stalled in 2009 over the contractual terms and pressures of sanctions. After Total’s
withdrawal, NIOC awarded the
$4.7 billion contract to China’s CNPC in 2009 but annulled the deal later, blaming the Chinese firm for “constant and
unprecedented” delays.
Today, Tasnim News Agency quoted POGC Managing Director Mohammad Meshkin-Fam as saying that the HoA that was signed this morning will turn into a contract in three months.
Meshkin-Fam who was speaking at a press conference on the
sidelines of the signing ceremony said the project aims to produce about 2 billion cubic feet per day of natural gas, and underscored that the contract includes transfer of technology of designing and building gas compressor structures from Total.
Egyptian Petroleum minister may visit Tehran to discus oil purchase deal
According to some news sources, Petroleum Minister Bijan
Zangeneh was scheduled to meet with Tarek El Molla, Egyptian minister of Petroleum today in Tehran. An unnamed Iranian official had earlier told Reuters that the two ministers are
scheduled to discuss “expansion of crude trade.” Earlier on November 6th, Reuters had reported that the Egyptian minister makes a “rare trip” to Iran to strike new oil deals, after Saudi Arabian Aramco
suspended its oil supply agreement to this country last month on political excuses.
Egyptian Minister Molla was to meet several senior Iranian officials to discuss the possibility of securing oil supplies from Tehran, one source, who
accompanied Molla to the airport, told Reuters. Shana, the Ministry of petroleum’s news agency however denied the visit it of the Egyptian minister. The news agency quoted an unnamed official at the Iranian ministry of Petroleum as saying that he is not aware of this visit.
British Petroleum and NISOC negotiate developing four Iranian oil fields
The managing director of the National Iranian South Oil
Company (NISOC) said developing four independent Iranian oil fields is being negotiated with the British Petroleum Company, Tasnim News Agency reported on Monday. Bijan Aali-Pour who was speaking on
3 the sidelines of an oil equipment
exhibition in southern city of Ahvaz said that negotiations have so far been held with 22 domestic and foreign companies including Russian and Chinese firms for developing the four fields of Karanj, Rag-Sefid, Parsi, and Shadegan. He said the contracts will be signed under an IPC framework (newly-initiated oil contract model) and BP is among the companies that have further negotiations. Aali-Pour estimated that a contract will be signed in the next few months in this regard.
NISOC is a subsidiary of National Iranian Oil Company and the crude oil produced under the
management of this company accounts for more than 80% of the coutnry’s total oil output, and hence, this company is the biggest state-owned oil producer in Iran with activities being focused on southern areas of the country.
