Iran is expected to outline the terms of new oil contracts this month that will allow foreign companies to take stakes in one of the last cheap and accessible oil and gas reserves in the world.
Mehdi Hosseini, who heads Iran’s oil contracts revision committee, said Iran will welcome feedback from international oil companies on these contracts, after which further adjustments could be made, FT reported.
Executives of foreign oil companies, ranging from Italy’s Eni and France’s Total to Japan’s Mitsubishi and Russia’s Lukoil, were in Tehran in mid-October to hold discussions with Iranian officials — the first major oil and gas conference since the July nuclear deal with world powers.
Leaders of some of the world’s biggest oil companies believe the prize of winning business in Iran is worth the effort, even as $50 a barrel oil forces them to curb investment elsewhere.
European and Asian players stole a march on their American rivals at the conference by delivering pitches about their companies’ competence. Although international sanctions remain in place, European oil majors have been able to speak to their Iranian counterparts and provide feedback on draft contracts while the US has stricter laws preventing them from doing so.
Oil Minister Bijan Namdar Zanganeh has a vision of his country returning to export and production levels that existed prior to the imposition of sanctions by overhauling a sector starved of investment.
Foreign oil companies are being invited to become partners in a range of exploration, appraisal, development and production activities.
Zanganeh said Iran could increase production by 500,000 barrels a day immediately following the lifting of sanctions and within seven months to attain its pre-sanctions level of at least 3.4 mbpd.
Iran aims eventually to increase oil production to more than 5 mbpd and gas to 1.4 billion cubic meters a day.
Rainer Seele, chairman and chief executive of OMV, which is looking to invest in oil and gas infrastructure, said “it will be a delicate undertaking ” for the country. He adds that Iran will need vast sums of foreign funding and technological expertise to consistently produce at these levels.
Rokneddin Javadi, head of the National Iranian Oil Company and deputy oil minister, says the Islamic Republic needs $100 billion over the next five years to develop the upstream oil sector alone.
The investment, he says, would be well worth the reward for international oil majors. Iran’s production cost is low — at between $5-10 a barrel for offshore production and ‘even lower’ for onshore.
Iran’s hydrocarbon reserves are owned by four state companies and their subsidiaries, which are controlled by the Oil Ministry. President Hassan Rouhani’s government has sought to privatize some segments of the industry through asset sales and the transfer of shares.
Companies such as Eni and Total are keen to tout their ability to provide financing to Iran, as well as offer access to markets, technical know-how and competence at managing costs efficiently, particularly in a low oil price environment. Iran has identified nearly 50 projects available for licensing.
Hossein Abbasi, a domestic services contractor, said: “Big European companies have already spoken with us saying they have talked to their banks and they are ready to work with us. Not only are they ready, we are ready too.”
Nov 2, 2015