Apr 18, 2018, 3:43 PM
News Code: 82890316
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1st Iran-Russia upstream contract signed

Tehran, April 18, IRNA – Iran struck a second oil deal under the framework of the newly developed Iran Petroleum Contract (IPC).

The first agreement was signed last July between the National Iranian Oil Company (NIOC) and a French Total-led consortium comprising China’s CNPCI and Iran’s Petropars for the development of Phase 11 of the giant offshore South Pars gas field.

The second such deal was signed on March 14 between the NIOC and a consortium of Russia’s Zarubezhneft and Iranian private company Dana Energy for the enhanced recovery from the Aban and West Paydar oil fields which Iran shares with the neighboring Iraq on its eastern border.

Zarubezhneft will hold an 80% share in the contract, while the remaining 20% will belong to Dana Energy.

Iran’s Minister of Petroleum Bijan Zangeneh, speaking at the signing ceremony of the new IPC deal, said some of “firsts” were recorded in the agreement to enhance the Aban and West Paydar output.

“For the first time, a renowned Russian company is helping develop Iranian oil fields. Of course, we were already cooperating with the Russians in oil and purchase of technical services; however, this is the first such contract for oil production within the framework of the new model of oil contracts, and I hope it would not be the last,” he said.

Zangeneh said Zarubezhneft’s partnership with a private Iranian company was another new achievement.

“A fully private E&P Iranian company is involved,” he said, noting that the agreement with the Russian-led consortium was the second IPC deal. The minister said increased production from Aban and West Paydar would earn Iran $4 billion in revenue. “With a combined production of 67 million barrels of oil from these two fields, at current prices, $4 billion will be added to state revenue,” he said.

“This agreement has been signed for the development of two jointly owned fields which are already producing, and they will undergo improved oil recovery (IOR),” he added. “Had such agreement not been signed for the development of Aban and West Paydar fields accumulated production from these two fields would have not reached even 38 million barrels in ten years, but now thanks to this agreement, 67 million barrels will be added to their combined output to reach 105 million barrels,” said Zangeneh.

The minister said enhanced recovery was a key factor in this contract.

“This agreement is signed for a period of ten years, during which we hope to be able to find new solutions for enhanced recovery from these fields.” Zangeneh said negotiations were underway with other Russian companies including Gazprom Neft, Tatneft, Lukoil and Gazprom for the development of other oil and gas fields.

He said the Iranian Ministry of Petroleum would be facing tough tasks in the new calendar year which started on March 21, adding, “Most of talks are in their final stage and we hope to see signature of new contracts soon.”

Zangeneh said domestic manufacturing would be a key part of the deal with Zarubezhneft, adding that Iranian companies would be involved in drilling and other activities.

“Signature of such contracts is fundamental forth petroleum industry. It is also risky, but we have to accept risks,” he added.

With a combined production of 67 million barrels of oil from these two fields, at current prices, $4billion will be added to state revenue, Gholam-Reza Manouchehri, deputy CEO of NIOC for development and engineering, said: “The Aban and West Paydar fields are already producing oil, but they will soon face output decline.

Therefore, the main objective of this agreement is to enhance their production.” “The total investment to be made under this contract would be around $670 million, 10% of which will be spent on non-capital costs,” he said.

“In drawing up the contract, the issue of domestic manufacturing and maximum contribution of Iranian companies have been taken into consideration and the Russian side has accepted necessary obligations. Implementation of this agreement heralds transfer of enhanced recovery (EOR) technology,” said Manouchehri.

He said this agreement would bring prosperity to domestic manufacturers of equipment for the petroleum industry, adding, “We hope that in the near future it would become possible to manufacture hundreds and even thousands of ESP pumps in the country.” Manouchehri also touched on negotiations under way for upstream oil projects, saying: “Currently, we are actively following up on the negotiations for the development of 22 oil and gas fields.” He said talks had been almost finalized with a view to signing agreements for the Yaran, Mansouri, Sepehr and Jofair fields. He also gave a positive assessment of negotiations under way for the development of Azar, Ab Teimour, Changouleh, Dehloran, Maroun (Bangestan) and Koupal.

Manouchehri said talks had begun on Yadavaran field, while Azadegan was still on the agenda. He said NIOC was in talks with India for the development of Farzad B gas field. “The agreement for the development of Balal field will be signed soon with domestic companies and completion of Forouzan field development is on the cards. Meantime, negotiations with other Russian companies including Gazprom Neft and Rosneft are under way, which we hope will be finalized one after another.”

“Nearly 30 EPC agreements are on the NIOC agenda for oil recovery enhancement,” he said, expressing hope that Iran would experience prosperity in this sector in the second half of the new calendar year.

Technological Savvy

Mohammad Iravani, CEO of Dana Energy, highlighted transfer of technology and financing as the most important issue in Iran-Russia cooperation.

“The private sector in Iran is facing restrictions which we hope will be removed,” he said. “Ever since introducing the new model of oil contracts, the Iranian Ministry of Petroleum was seeking to create E&P companies and engage them in the new contracts,” he added.

Iravani said the main idea behind IPC deals was to transfer technical knowhow and management to Iranian companies.

“The most important issue in Iran-Russia agreement is transfer of technology, management of knowledge and financing,” he said.

Details on Oil Fields

Aban oilfield is located 38 kilometers southwest of the city of Dehloran, and West Paydar field is situated 150 kilometers northwest of the oil-rich city of Ahvaz and 35 kilometers from Cheshmeh-Khosh processing facility in Ilam Province. Both fields are jointly owned by Iran and Iraq. Their current production together stands at 36,000 b/d. A memorandum of understanding (MOU) was signed with Zarubezhneft on 12 July 2016 for the Russian company to study Aban and West Paydar under IPC provisions with a view to accelerating oil and gas fields Iran shares with neighboring countries. The agreement with Zarubezhneft is meant for the two fields to produce up to 48,000 b/d with an accumulated output of 67 million barrels over ten years.

The agreement is subject to renewal upon request by the parties hereto. The main jobs envisaged to be carried out under this agreement include conducting engineering studies, workover of wells and their equipment with downhole pumps, reconstruction, repair and renovation of existing installations, installation of separator, installation of multiphase flowmeter, and transforming a production well into a waste injection well in Phase 1, and purchase and installation of oil, gas and water transmission unit, drilling eight appraisal/production wells, purchase and installation of downhole pumps, installation and operation of separator, conducting 3D seismic studies, and drilling relief wells in Phase 2. The CAPEX calculated for the development of Aban and West Paydar fields is estimated at $674 million (including direct capital, and downhole pumps repair and replacement costs).

Indirect costs are estimated at $68 million. Once operational, this project will create technical jobs on a large scale in Ilam Province, particularly workshops to repair and rebuild ESP pumps for the first time in that area.

Furthermore, Zarubezhneft is expected to apply its enhanced oil recovery (EOR) technology in these fields so that the Iranian parties would learn about the technology and its application.

Source: Iran Petroleum


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