IPC conference wraps up

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On December 2, 2015, Posted by , In News, With No Comments

Representatives from 137 petroleum firms attended the Iran Petroleum Conference (IPC) in Tehran from November 28-29. The participants were introduced with the outlines of a new model of contracts that the Islamic Republic will be offering after the removal of Western sanctions.

Iran pitched 52 oil and gas development projects worth more than $30 billion, including 29 new and currently producing oilfields and 23 gas developments. Onshore fields make up 34 of the projects.

Pars Oil and Gas Company (POGC) put four of its petroleum fields, including North Pars, Golshan, Ferdows and South Pars, on offer during the IPC conference.

However, SHANA news agency reported on Sunday that Phase 11 of the South Pars will not be offered with the new IPC format contracts.

POGC produces over 400 mcm of natural gas from these fields on a daily basis and aims to double its output in the near future. Ehsan Mohammadi, a POGC official, said the company requires $64 billion to reach its production goals.

CEO of the Norwegian Globel Geo Services, Bjorn Ursin-holm told IRNA that there is fierce competition between international companies to have presence in the Iranian energy industry. Geo started cooperation with Iran in 1993 but wrapped up the presence when added restrictions were imposed by the Western sanctions.

Representative of the Croatian oil firm INA, Branimir Kesic told Shana that the IPC demonstrates new approach towards foreign investors, adding, ‘It is highly likely that INA will invest in exploration and production of oil and gas in Iran.’

The overhaul of Iran’s energy contract programs and the IPC Tehran summit was a preview to the later London conference to be held on February 22-24. The following is a list of some of the characteristics of the new model of contracts:

–Companies will be allowed to sell oil abroad. This clause will allow companies to earn more if they produce more, a situation that did not exist in the past under fixed payment schemes. According to Iranian officials IPC bears risk for both sides, Iranian and foreign contractors. However, a reward system envisaged would entitle contractors to a fee per barrel that would be paid as profit to the company;

–Contractors would be entitled to an increase in profits in case of dramatic oil price fluctuations;

–Contracts could last for longer periods, estimated to be more than 20 years, whereas the previous contracts only lasted seven years;

–Foreign companies will have partners with local Iranian entity;

–International companies will get higher fees to raise output;

–Contractors are not allowed to transfer oil reservoirs to other companies;

–Foreign companies can no longer dash out of their contractual obligations if sanctions are ever re-imposed on Iran;

–In terms of investment and banking costs, IPC contracts are exactly similar to buyback agreements; and

–New model of energy contracts do not require Majlis (Parliament) approval, Petroleum Minister Bijan Zangeneh declared on Sunday.

On the sidelines of the IPC conference, Mr. Zangeneh said: ‘We do not oppose their (American oil firms) presence. They can come and use this opportunity.’ Asked if American companies would attend the follow-up London conference in February he said, ‘I hope so.’

‘As you see there are no American companies here now and it does not make sense for such a conference not to have Americans,’ an Iranian oil ministry official was quoted by the Financial Times.

The new contract model has not been without criticism. MP Ahmad Tavakkoli said Sunday that under the new framework, a foreign investor ‘will carry out certain operations at our expense which are not allowed by the Constitution,’ citing exploitation and production from oil fields which cannot be conceded to the private sector.

Tavakoli also criticized the clause that allows foreign companies to’ receive separate returns for their investment without paying tariffs, customs or even worker insurance.’

Meanwhile, Mr. Zangeneh has defended the contract model but said it may need amendment and development.

Iran is expected to sign its first development contracts in March or April next year, said Ali Kardor, deputy director of investment and financing at NIOC.

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