Speaking with reporters after a meeting with Deputy Administrator of National Energy Administration of China Zhang Yuqing, Zanganeh said Iran regards China as a strategic partner in oil, gas and petrochemical sectors.
Will China gain the most from post-sanctions Iran oil and gas?
Iranian Oil Minister Bijan Zanganeh said Chinese companies will develop Phase II of North Azadegan and Yadavaran oilfields as the two countries have decided to widen cooperation in the post-sanctions era. Speaking with reporters after a meeting with Deputy Administrator of National Energy Administration of China Zhang Yuqing, Zanganeh said Iran regards China as a strategic partner in oil, gas and petrochemical sectors and this is something they are pretty aware of, Shana reported.
He said there have been glitches in fulfilment of some projects by Chinese contractors in Iran in the past and these issues were discussed during the meeting with the Chinese official. Development of Masjed Soleyman, North and South Azadegan oilfields were among the projects that were handed over to Chinese companies for development but did not proceed as it was planned. “The two sides have agreed to pursue these matters to solve the remaining problems,” he said.
The official said Iran has agreed to cede development of North Azadegan and Yadavaran oilfields to the Chinese, but the Chinese side “must pull itself together first”. He also said China is currently buying 600,000 bpd of crude oil from Iran which can be raised.
The Iranian minister added that manufacturing of oil industry parts was also discussed in his meeting with Yuqing and that Chinese companies will invest in Iran in this field. Zanganeh also said that Chinese firms have indicated readiness to join Iran’s mini-LNG and LNG projects and have said they will offer their proposals to Iran in this regard.
The Iranian minister said an important part of Iran-China relations has been formed during the sanctions era, adding the two countries will widen cooperation in the post-sanctions era, IRNA reported. China is a traditional customer of Iranian crude oil and has raised its imports over 13 percent after implementation of the last year nuclear agreement between Tehran and world powers. Some Chinese companies which did not leave Iran during sanctions era have stressed more active presence in the post-sanctions period. China had been the biggest importer of Iranian oil at the time of the sanctions.
Can Iran really add 500,000 bpd oil supply in a year?
Yes, according to the chief of the International Energy Agency. Iran, previously OPEC’s second-largest exporter, would need to prove that the investment conditions were profitable to the international investors and also that there was predictability in the markets, according to Fatih Birol, the IEA’s executive director. And increases in Iranian gas supplies would come after oil. Birol’s estimate of Iran’s supply increase from existing oilfields was in line with previous market estimates.
Balancing risk and reward in the Iranian oil and gas opportunity
To balance risk and reward, let us go through the newly available opportunities now awaiting oil and gas companies in Iran.
E&P opportunities for operators and technical service providers
As Iran intends development of additional 3.5 mmb/d of crude & 7 bcf/d of natural gas production capacity, it needs investment of around $120 billion for exploration and production (E&P).
E&P projects in Iran are technologically low risk because of subsurface geology. They provide competitive opportunities for IOCs to overcome the current problem of low cash flow conditions in the low oil price environment, especially in light of the need to cut down on capex over the next 1-2 years.
NOCs looking to export oil face the challenge of erstwhile contracts not allowing ownership of oil or gas and the contracts’ rigidity compared to international norms. Therefore, these companies need to closely watch for the announcement of project details on new standard contracts, which was slated to be announced in London this February but was postponed in part to make way for Iran’s elections.
Midstream and downstream opportunities for operators and engineering service providers
These projects, together with mid-stream and downstream projects including LNG plants, export facilities, petrochemical plants, etc. may need over $150 billion dollars over a period of 5 years or even less.
Petrochemical demand currently is subdued due to slower global economic growth, and LNG prices, both spot and long term, have suffered due to the drop in associated crude prices and term contracts being revised for lower prices to maintain market share. The RasGas and Petronet deal renegotiation is a strong indicator of this.
Project specific risks need to be factored in dynamically as their magnitude may have significant commercial implications. For instance, India’s plan to construct a subsea pipeline may have to be completely dropped in the wake of the United Nations Convention on the Law of the Sea (UNCLOS) decision of March 2015 to extend Pakistan’s seabed territory by an additional 150 km.
Why is everyone so excited about Iran?
By various estimates Iran has the fourth largest oil reserves in the world, at approximately 150 billion barrels (24×109 m3) as of 2014, although it ranks third if Canadian reserves of unconventional oil are excluded. This is roughly 10% of the world’s total proven oil reserves. At 2006 rates of production, Iran’s oil reserves would last 98 years even if no new oil was found.
In natural gas Iran is an even bigger giant, with the US Energy Information Administration placing its reserves as the #1 largest in the world at 1,187 trillion cubic feet (33.6 trillion cubic metres). This is about 16% of world’s total reserves, of which 33% are as associated gas and 67% is in non associated gas fields.
Since the nation’s first oil well in 1908, 145 hydrocarbon fields and 297 oil and gas reservoirs have been discovered in Iran, with many fields having multiple pay zones. A total of 102 fields are oil and the remaining 43 are gas, and there are 205 oil reservoirs and 92 natural gas reservoirs.
According to Iran Energy Balance Sheet, 78 of these fields are currently active, with 62 onshore and 16 offshore, leaving 67 fields inactive at present. Some 23 hydrocarbon fields lie in border areas and are shared between Iran and adjacent countries, including Kuwait, Iraq, Qatar, Bahrain, UAE, Saudi Arabia and Turkmenistan.
The Permo-Triassic successions (the Dehram group in Iran and its lateral equivalent, the Khuff formation), are major gas-producing intervals in these basins. The supergiant North Dome/South Pars field alone is estimated to hold about 19% of the world’s total gas reserves, producing gas and condensate from these intervals.
Iran still has huge potential for new significant gas discoveries: areas such as Caspian Sea, North East, Central Kavir and especially areas starting from Aghar and Dalan gas fields in Fars province up to the Strait of Hormuz and Central Persian Gulf have considerable potential for undiscovered gas. According to Exploration Directorate of NIOC, there are about 150 unexplored anticlines in Iran.
In 1998, the US Geological Survey estimated Iran’s undiscovered gas resources to be in the range of 226 to 820 trillion cubic feet, with a probability-weighted average of 465 trillion cubic feet (13.2 trillion cubic metres). And they are cheaper to produce than shale and other unconventional reserves, whose producers are now being squeezed by the prolonged depression in oil prices, and need a way out. Iran is not beating around the bush, either –”NIOC has a target of producing one billion cubic meters of gas per day.” Iranian Minister of Petroleum Gholam-Hossein Nozari, in January 2008
The sanctions are lifted– have you registered yet for 27-28 September 2016 in Paris?
January 16, 2016, saw Implementation Day of the Joint Comprehensive Plan of Action (JCPOA) arrive, heralding the lifting of international sanctions that have left Iran’s oil and gas technology far behind the rest of the world. The country’s oil reserves are the fourth largest in the world, and its gas reserves are the largest in the world, yet these remain underdeveloped. In anticipation of this moment, Iran had already opened tender for $30 billion worth of oil and gas projects in November 2015.
Iran’s re-entry changes the oil and gas industry.
U.S. and European Union sanctions on Tehran were finally lifted on 16 January 2016, restoring Iran’s access to world markets. Iran has been gearing up for this moment for months, already making available $30 billion worth of oil and gas projects in November 2015. Iran’s oil minister Bijan Zanganeh has announced that Iran is aiming to increase output by close to 1.5 million barrels per day by the end of 2016, taking daily production to 4.2 million bpd.
Iran oil minister Bijan Zanganeh, in a CNN interview “Do you believe that … our country will accept not to produce, to secure the market for others? It’s not fair.” Iran plans to invest a total of $500 billion in the oil sector before 2025. But both Iran and the global petroleum industry have changed significantly since international sanctions prompted a prolonged exodus of foreign oil and gas companies from Iran.
How do we:
• Readjust to the new pricing landscape?
• Accurately assess the impact and implications of Iran’s oil reforms?
• Ensure mutually beneficial partnerships between operators and service companies?
• Participate in the next bidding and licensing rounds?
• Optimise relationships with Iranian companies and government agencies?
• Attract and secure adequate financing and insurance for Iranian projects?
• Adapt to the latest local content policies?
• Manage partnerships and technology transfer correctly?
• Explore M&A opportunities in Iran?
• Design the progression of our involvement in Iran?
• Tap regional oil and gas markets to export Iranian crude, natural gas, and refined products?
• Regain market share lost to Asian providers?
Lili Mottaghi, World Bank MENA Economist, “Since the framework agreement of April 2015, we have seen increased interest from multinational companies in investing in Iran, especially in the oil and gas sector.”
The new reality not only enables Iran to attract considerable foreign investment and reanimate its dormant oil fields, for instance via the tender of $30 billion worth of oil and gas projects at the Tehran Summit in November 2015, but will also encourage further exploration and development, for example in the Caspian Sea, which holds vast reserves of untapped oil. Iran has the world’s largest proven natural gas reserves at 41.14 trillion cubic meters, which is 15% of the world’s total, and this sector has been underdeveloped because of the sanctions, so their lifting now opens up lower-cost natural gas opportunities for foreign companies to tap, particularly as the South Pars offshore gas field, located at the center of the Persian Gulf, comes on-stream.
Iran has a high success rate in natural gas exploration, at 79 percent, compared to 30-35 percent for most other gas-rich nations. However, the infrastructure and know-how required to tap into and exploit these reserves are underdeveloped. There is much scope, therefore, for foreign firms to help modernise technologies and operational mechanisms and enable the country to compete with other sophisticated players in the oil and gas market, particularly with oil prices now at 12-year lows.
Attend Iran Fields, Pipelines and Refineries 2016 on 27-28 September 2016 in Paris, France and discover the latest partnership, pricing and network-expansion opportunities for your re-entry into Iran’s $250 billion oil & gas industry. Iran Fields, Pipelines & Refineries 2016 scheduled 27-28 September 2016 in Paris, France has been specifically designed by industry veterans to enable solutions to these challenges which you can take advantage of to –
• Access inside information on the new Iran Petroleum Contract (IPC)
• Discover technical data on upstream, midstream and downstream projects
• Understand on-the-ground banking realities to ensure timely payments
• Harness existing networks from local companies already providing services in Iran
• Gain buyer insight from recipients of Iranian oil and gas exports
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