NIOC Signs 1st New-Style Contract
POGIDC Partnering Europe Firms
National Iranian Oil Company (NIOC) and Persia Oil & Gas Industry Development Company (POGIDC), affiliated with Tadbir Energy Development Group have signed a heads of agreement (HOA) to enhance recovery from Yaran, Maroun Bangestan, Koupal Asmari and Koupal Bangestan oil fields.
This agreement, which is the first new model oil contract, is hoped to enable Iranian companies prove their capabilities.
Addressing the event organized for the HOA signature on October 4, Iran’s Minister of Petroleum Bijan Zangeneh said: “Today, the HOA for enhanced recovery from four oil fields is being signed with Persia Oil & Gas Industry Development Company. It will become an agreement in the near future.”
The Iranian minister said that the text of the relevant agreement has yet to be finalized, noting that it is being readied.
In addition to the text of the agreement, there are more than 500 pages of appendices attached.
“In order to speed up executive work and save time, we decided to use HOA signature method. HOA involves the master development plan (MDP), total cost estimate, profits, contractor’s fee and the calendar for the implementation of the project,” said Zangeneh.
Responding to criticisms about formation of exploration and development (E&P) companies in Iran, the minister said: “Currently in Iran we have no E&P companies, but we are in the process of establishing such companies and that is an important issue.”
“Many were critical of formation of these companies, citing the undermining of National Iranian Oil Company. But that’s not like this,” he said.
E&P Companies
Zangeneh said eight E&P Iranian companies have been endorsed to be established, adding: “In the aftermath of new surveys, these companies are likely to number up to 10. The Iranian Ministry of Petroleum will help these companies because in the end supporting such entities would help strengthen the petroleum industry and create jobs.”
He said that one of objectives pursued by the new model of oil contracts was to boost E&P companies.
He said that general contractor companies were established in Iran when he was last minister up to 2005.
“Formation of these companies (GC) was facing certain problems, but these companies are currently operating as knowledge-based companies. E&P companies are also knowledge-based companies whose asset is engineering, management and technical capability. Definitely, formation of E&P companies in Iran and their maturity would help Iran gain revenues from outside the country,” said Zangeneh.
Under new model of oil contracts designed by Iran’s Ministry of Petroleum, foreign companies will have to form a joint operating company with an Iranian E&P company before being allowed to develop oil and gas fields.
Iranian companies whose qualifications are approved by the Ministry of Petroleum would be allowed to sign an independent contract with NIOC in a bid to steer the project.
The HOA signed with POGIDC the first of its kind struck with an Iranian company to steer the project. POGIDC is now required to set up a joint operating company with a foreign party.
Other Iranian companies that could prove their financial capability in addition to technical qualifications will be considered as proper choices for cooperation contracts, Zangeneh said, adding that technological capabilities are more significant than financial capabilities.
Focus on EOR
Zangeneh said the HOA signed with POGIDC is based on enhanced oil recovery (EOR) from the aforesaid fields, adding: “Currently, the Ministry of Petroleum is seriously focused on EOR from oil fields. As much as jointly owned fields are prioritized the recovery rate is important.”
Underlining the need for the implementation of EOR projects, he said: “At present, we have 60 reservoirs in oil-rich regions in the south, all of which need EOR projects.”
“There are also offshore fields, gas fields in central Iran and newly discovered fields that all need investment [for development]. It must be noted that the time is now ripe for domestic and foreign investment as well as [transfer of] technology. Drilling wells alone would not be enough. Rather, it is important to reach maximum recovery from fields.”
Zangeneh said National Iranian South Oil Company (NISOC) plans to develop some fields like Rag Sefid, Maroun, Bangestan, Khami, Koranj, Parsi and Pabdeh.
“The objective is to benefit from all national capacities for the development of the country and meeting our needs,” he said.
New-Style Contracts, a Chance
Ali Kardor, CEO of NIOC, said that the signature of HOA with POGIDC would prove a good chance for eight Iranian companies shortlisted for E&P activities to put their capabilities into practice. These eight companies used to operate EPC projects.
POGIDC is one of these eight companies. It has no long experience, but it managed to prove itself by developing North Yaran oil field specially during years of international sanctions against Iran’s oil sector.
Kardor noted that the Ministry of Petroleum and NIOC are seriously pursuing enhanced recovery of oil from reservoirs, adding: “NIOC expects Persia Oil and Gas to take this issue into account.”
Enhanced recovery needs technology and innovation. POGIDC is largely expected to be able to handle the job assigned to it.
75,000 b/d Hike
Touching on production from these oil fields, Kardor said: “Currently, four fields – Yaran, Maroun Bangestan, Koupal Bangestan and Koupal Asmari – are producing 185,000 b/d, which is projected to reach 260,000 b/d. But our expectations go beyond 260,000 b/d and enhanced recovery would facilitate it.”
“Currently, the recovery rate in Yaran, Maroun Bangestan and Koupal Bangestan is 10%, 9.3% and 13 percent while Koupal Amsari, which has better conditions, has a recovery rate of 18 to 20%,” he said.
Kardor said that under the signed HOA, the recovery rate of these reservoirs would increase by application of cutting-edge technology.
$2.2b Credit
Kardor said the first new-style contract is forecast to need $2.2 billion in investment.
“These four fields are estimated to hold 14.5 billion barrels of oil in place, 2.5 billion barrels of which would be recoverable. Efforts are under way for increasing this figure by applying state-of-the-art technologies,” he added.
Kardor said Iran would earn $27 billion in revenue during this 20-year contract for enhanced recovery from the aforementioned fields.
He said that POGIDC has negotiated with European and Russian companies for partnership to develop Yaran, Maroun and Koupal fields.
He added that foreign companies willing to invest in Iran’s petroleum industry projects within the framework of new-style contracts are set to provide data next week.