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Iran names Russian firms to major project

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Iran is about to tender its first major oil and gas development project under a new model contract next month.

The National Iranian Oil Company (NIOC) has added four Russian companies and Azerbaijan’s state oil firm Socar to the list of firms qualified for development work in the Islamic Republic. 

The addition of Gazprom Neft, Rosneft, Tatneft and Zarubezhneft takes the number of international companies named as eligible to bid for projects in Iran’s massive oil and gas sector to 34.

The updated list comes as Iran’s June 19 deadline for companies to provide details of their planned consortia for the giant Azadegan oil field draws to a close.  

Azadegan, discovered in 1999, is the world's third largest oil field with in-place reserves of about 33.2 billion barrels, about 6 billion barrels of which are recoverable.

Tender under new model contract

According to Iranian officials, invitation letters have been sent out to the prequalified companies to submit their proposals. Those eligible have reportedly been asked to seek NIOC’s approval if they are picking up partners which are not on the list.  

Tender documents are said to be distributed next month, marking Iran’s first offering of development projects under the Iran Petroleum Contract (IPC).

The new model has been subject to repeated reviews amid fears that it might compromise Iran’s national interests at the expense of making business with the country more flexible.

The IPC, described as a hybrid model, will replace the buy-back contract. It is being touted as a risk service contract which includes integrated exploration, development and production.  

Officials have said a single tender would be held for the development of the onshore Azadegan field which includes the north and south sections.

NIOC first teamed up with Inpex to push the project toward development before the Japanese company withdrew in what appeared to be the result of US sanctions against Iran.

The Iranian company later awarded both South Azadegan and North Azadegan to China’s CNPC when former president Mahmoud Ahmadinejad was in office between 2005 and 2013.

In 2014, Iran's Minister of Petroleum Bijan Zangeneh reportedly terminated CNPC’s contract for South Azadegan due to its protracted delays in developing the field. The Chinese company began operating North Azadegan with 75,000 barrels per day (bpd).

Core of Iran’s upstream development

Azadegan is currently producing 125,000 bpd, with 50,000 bpd from the south. NIOC seeks to raise production to 150,000 bpd in the north and 600,000 bpd in the south.

An Inpex official, cited by Platts, said in May that the largest upstream Japanese company would consider bidding for Azedgan’s development and that the firm was already in the process of collecting information about the field.

According to Iranian Ministry of Petroleum’s Shana news agency, France’s Total, Malaysia's state-owned Petronas and Royal Dutch Shell are also interested in the field and have handed over their technical studies report and surveys on Azadegan’s crude reserves to NIOC. 

Iman Nasseri, a senior consultant at FGE global oil and gas consultancy, described Azadegan as the core of Iran's upstream development plans, which accounts for most of Iran's target for oil production capacity increase.

“Hence, the upcoming tender is perhaps the most important event the government has been looking forward to for months now, if not years," Platts quoted him as saying.

Among the prequalified international companies, Russia has the single largest number of the firms on the list which also includes Gazprom and Lukoil, followed by five companies from Japan.   

Earlier this month, Gazprom Neft and Austria's OMV signed an MoU to carry out "analysis, assessment and study” of Changuleh and Cheshmeh Khosh oil fields in Ilam province. OMV has also been invited to participate in the Azadegan tender.

Lukoil seeks to boost oil recovery from Ab Teymour and Mansouri fields. Gazprom Neft said it was "studying the possibility of participating in the development of two blocks in Iran" and given OMV's experience in Iran and the Middle East, "joint geological assessment of blocks will be most effective."

Among major new comers, Germany’s largest oil and gas producer Wintershall seeks to develop four oil fields in western Iran while Denmark’s Maersk is interested in developing South Pars’ oil layer, according to Deputy Minister of Petroleum Ali Kardor.

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