Iran - Total Is Bidding For Sirri C & D Fields; Shell To Sign S. Pars Deal.

Total of France is preparing to submit a bid for the development of offshore Sirri C and D oilfields on buyback basis. The project is to raise the fields' oil recovery rate from 28,000 b/d to 50,000 b/d within less than two years. The production capacity would be increased to almost 75,000 b/d about two years later. A buyback contract could be signed before end-1998 by the National Iranian Oil Co. (NIOC) and Total. The Sirri group of fields, discovered in 1972 by Elf Aquitaine of France (Sofiran), are on the median line with Dubai's Fateh and Fallah oilfields. Located near Sirri island about 200 km south-east of Lavan, they consist of five fields: Sirri-A, B, C, D, and E, with depths below the seabed ranging between 7,800 and 8,200 feet. Oil reserves at Sirri B are negligible. Sirri C and D went on stream in late 1978. Now they are only producing about 25,000 b/d of 31 deg. API oil out of the Nasr platform. Reserves of Sirri-D have been put at 300m barrels of oil in place. The platform was heavily damaged in retaliatory strikes by the US Navy in April 1988. It resumed production in February 1992 at the rate of 35,000 b/d after $50m worth of repair work by ETPM Entrepose of France (ETPM has repaired the Kharg Island oil export terminal as well). Before the US attack, this platform used to produce 50,000 b/d. Total is already developing Sirri A and E under a $600m buyback contract signed in July 1995. Sirri A began oil production on Oct. 8 at the rate of 7,000 b/d from three wells at a water depth of 65 metres. The field's production is to reach 20,000 b/d next week from a total of 11 wells. The field's output may rise to about 25,000 b/d during the first half of 1999. Total will bring Sirri E on stream by April 1999 with an initial capacity of 60,000 b/d. Eventually, its production would reach 100,000 b/d. Sirri A and E are estimated to have combined reserves of 486m barrels of oil, with 436m barrels in Sirri E and 50m barrels in Sirri-A. The deal for Sirri A and E was signed despite US pressure. It was the first and only buyback contract signed between Iran and a foreign company since 1979. Petronas Carigali, the overseas upstream subsidiary of Petronas of Malaysia, joined in 1996 as a partner in the venture with a 30% stake and an investment of $180m. Total awarded the $175m offshore building contract to Serimer, a subsidiary of ETPM, and to the local Offshore Industries Company (Saff) which is owned by Iran Marine Industrial Co. (Sadra) and private interests. The contract was awarded just before the Aug. 5, 1996, enactment of the Iran-Libya Sanctions Act by the US, aimed at punishing companies which invest more than $20m per annum in Iran's energy sector.

Sirri A and E will share the existing infrastructure at Sirri C and D, including the export terminal, utilities and other facilities. Petronas is expected to be part of Total's deal for the Sirri C and D project. The oil in the Sirri group is very rich in associated gas. Sirri A and E will together produce more than 100 MCF/day of gas. Total is to take the bulk of the gas for reinjection into Dubai's oilfields, operated by Conoco of the US which in June 1995 was forced by Washington to drop its Sirri A and E deal with NIOC. A marine pipeline is being built from there to Dubai's oilfields. Under the 1995 deal, updated in 1996 when the Malaysian company joined the French major, NIOC is to take over responsibility for operations as soon as production at Sirri E begins. Total and Petronas would jointly lift a third of the output to meet the costs incurred in developing the two fields. NIOC will then supply Total and Petronas with oil for a period of five years. According to NIOC in July 1995, the deal would earn Iran about $12.5 bn plus about $750m from gas sales. Total has begun developing phases two and three of the South Pars gas super- giant, which is connected to Qatar's North Field, under a $2 bn buyback deal. In this, Total holds 40% and its non-operating partners are Petronas (30%) and Gazprom of Russia (30%), with gas and condensate production scheduled to begin in mid-2001. NIOC's gas unit NIGC is hoping that a buyback contract with Shell for phases four and five at South Pars would be signed by end-1998 (see Gas Market Trends). Total is studying a 1m b/d pipeline from Kazakhstan and Turkmenistan to Iran, in yet another project promoted by Ashgabat. The pipeline would begin from Western Kazakhstan, where crude oil would be pumped through Turkmenistan. It would then take Turkmen crudes on its way to Iran's northern oil refineries. The French company was commissioned for this in October 1998 by the Presidential Council on Hydrocarbons Exploitation of Turkmenistan. The same council commissioned Thyssen of Germany to carry out studies for a 300,000 b/d crude oil pipeline from Turkmenistan to Iran's northern refineries. When the two pipelines have begun operations, Iran would pump equivalent amounts of crude oil through its Persian Gulf terminals for export under swap deals, according to a Turkmen official. It is not yet clear how these two projects would affect the 390 km pipeline to be built from Iran's Caspian port of Neka to Tehran with a capacity of 370,000 b/d to supply the Tehran and Tabriz oil refineries with Central Asian crude oils. The latter project is to be built by foreign companies on BOT and land lease basis and should be on stream by early 2001. More than a dozen foreign consortia, including Monument Oil & Gas of the UK and Saipem of Italy, have bid for the $400m Neka-Tehran project, which includes storage and facilities to blend Kazakh and Turkmen crude oils. NIOC was expected to announce the winner during the first week of December. Construction work should begin in early 1999. Khazar E&P In Deal With BP, Shell & LASMO For Caspian Blocks: A JV for oil exploration and development on the Iranian side of the Caspian Sea is being negotiated by NIOC's affiliate Khazar Exploration & Production Co. (KEPCO), British Petroleum, Shell and LASMO Oil of Scotland. The exploration phase would entail an investment of less than $20m over a two-year period and would include a 2D seismic work. NIOC is hoping the deal, covering three blocks, would be signed by end-1998 and exploration work would begin shortly thereafter. The blocks are believed to be rich in oil and are bordering Azerbaijan's waters. Doroud Is Going to Elf & Agip: Iranian Deputy Oil Minister for international affairs and JVs, Sayyed Mehdi Hosseini, said this week a buyback deal would be signed shortly between NIOC and a partnership of Elf Aquitaine and Agip to develop the offshore oilfield of Doroud. Elf would hold 55% and would be the operator. Agip would have a 45% stake. Involving an investment of $600m, the project is to double the field's capacity to 200,000 b/d. The project's main component would be an advanced system to reinject associated gas into the field. Saga Begins Work On Hendijan: Saga Petroleum of Norway has begun work on developing the Hendijan offshore oilfield under a buyback contract signed in September 1998. Saga is to raise the field's production from 8,000 b/d to about 25,000 b/d through a gas-based EOR system. Saga also signed an agreement with NIOC, worth about $2.7m, to provide a set of 2D seismic data and other studies on reservoirs in the Dara block, which is partly onshore and partly offshore, and other areas. Its studies will cover areas totalling 80,000 sq km.