Two subsidiaries of National Iranian Oil Company (NIOC) have signed nine agreements with seven Iranian contractors for the preservation and enhancement of recovery from Iranian oil fields.
The nine agreements were signed in the presence of Iran"s Petroleum Minister Bijan Zangeneh and CEO of NIOC Mehdi Karbasian.
That was part of a total of 33 enhanced recovery projects, worth $6 billion and envisioned for a three-year period.
The projects, which include 29 onshore and 4 offshore ones, are aimed at utilizing the potential of Iranian companies.
The seven oil-rich provinces where these projects are to become operational are: Khuzestan, Bushehr, Fars, Hormuzgan, Kermanshah, Ilam and Kohguiluyeh Boyer Ahmad.
The implementation of these projects is hoped to boost national crude oil production by 300,000 b/d on average.
On January 22, National Iranian South Oil Company (NISOC) struck agreements with Pars Energy Gostar Drilling and Exploration Company (PEDEX), National Iranian Drilling Company (NIDC), Petro Gohar Farasahel Kish CO. (PGFK) and Dana Kish Drilling Company for the Kaboud, Gachsaran Khami, Lali Asmari and Nargesi projects, respectively. Furthermore, NISOC and Oil Industries Engineering and Construction Company (OIEC) reached agreement on the Mansouri Asmari and Ramshir projects.
Meantime, the Iranian Central Oil Fields Company (ICOFC) reached agreement with MAPNA, Global Petro Tech Kish Company and NIDC for the Danan, Saadatabad and Naftshahr projects.
Last October, the Iranian Offshore Oil Company (IOOC) had struck deals with the Petroiran Development Company (PEDCO) for Sivand and Esfand projects.
$1bn Contracts Signed
Minister Zangeneh said only Iranian contractors would be involved in the new projects, saying the objective was to use maximum local content in manufacturing.
"For that purpose, a long list of domestic manufacturers has been drawn up and the contractors are required to purchase their commodities from them," he added.
Zangeneh said lifting oil production and empowering domestic contractors were among the major objectives of the projects.
"We hope that the contractors would start their work forcefully after providing for financing," he added.
The minister said the agreements struck so far, were now worth more than $1 billion.
"We have postponed the implementation of these projects for about six months so that when they start production we would be able to sell the surplus oil on the market and use part of this petro-money for reimbursing loans and bonds," he said.
Reconsidering Implementation Methods
Zangeneh said an advantage with the oil recovery enhancement projects was that the government or NIOC would not be responsible for financing.
"The issuance of fixed rate bonds are envisaged for the financing of these projects in the first phase. After one year, the necessary financing would be provided through oil recovery from the fields," he added.
The minister said another objective sought in the oil recovery projects was to revise the methods of implementation.
He said that the method of implementation of projects was being switched to EPC and EPD for the first time, noting that most general contractors would be able to handle it.
Zangeneh said the framework defined for the implementation of projects should be such that it would boost quality, make spending reasonable and shorten the duration of implementation.
"This objective is achieved when the integrity, interconnectivity, significance and the economy of a project are taken into consideration," he added.
Zangeneh said the implementation of these projects was aimed at creating jobs and pushing Iranian contractors.
"Implementing this plan sends a clear message to foreigners and some domestic circles who are trying to strike fears into people"s hearts with sanctions," he added.
The minister said that social responsibility would have a 4% share in the contracts.
"In other words, $240 million would be allocated to social responsibility. That is a breakthrough which would bring about good relations between the petroleum industry and others," he added.
Zangeneh said renovation of petroleum industry installations was a project for which NISOC was favored.
"Most of our oil installations look like museums, but they are still being run. We have selected consultants for the renovation of petroleum industry installations. They have done their job now," he said.
"In implementing preservation and production projects we plan to generate money and wealth without squeezing public budget," said the minister.
Zangeneh said reservoir engineering was under way in NISOC-run fields, adding: "Gathering information and hiring consulting engineers would lie within the framework of this project."
Project Financing Details
Reza Dehqan, deputy CEO of NIOC for development and engineering, said there was nothing worrying for Iranian contractors.
He said that 80% of the financing of contracts would be provided by Saba Arvand Oil and Gas Development Company, serving in the project as the special purpose vehicle (SPV) company.
"The remaining 20% would be provided by contractors involved in the agreement," he added.
To that end, he said, fixed rate bonds worth IRR 10,000 billion would be printed soon.
Dehqan said another IRR 20,000 billion of bonds would be printed before the end of the current calendar year for the financing of projects.
He said that the SPV company was required to finance the projects.
Dehqan said the idea of enhanced recovery in operating fields was first brought about by Minister Zangeneh in a bid to prepare the ground for the activity of domestic contractors and manufacturers.
"This project was on the agenda since last year and some working groups were established afterwards. The Economic Council approved it last July," he said.
Dehqan further touched on the 33 packages defined in this project, saying: "A total of 26 packages pertain to NISOC-run fields, 4 to IOOC-run fields and 3 to ICOFC-run fields."
Under these projects, 280 wells would be drilled while over 1,700 wells would be worked over. Offshore platforms would be also completed and installed.
Dehqan said the total investment agreed upon for the preservation and enhancement of recovery from operating fields stood at $6.2 billion.
He added: "Another $979 million in financing would be provided by the government."
The 33 projects are aimed at increasing oil output by 280,000 b/d, which would generate more than $20 billion in revenue.
Dehqan touched on the maximum use of local content in the projects, saying: "In order to use domestic manufacturers, two lists of domestically manufactured equipment have been drawn up and attached to the contracts."