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Iran - Mehdi Hosseini.

The Petroleum Ministry's IPC committee is headed by Iran's veteran E&P negotiator Hosseini, who is a special E&P adviser to Zanganeh and created the buy-back contract model in the 1990s. On Feb. 23, 2014 he told the Tehran conference: The new IPCs will offer higher fixed fees for riskier E&P projects. Local and IOC executives attended the Feb. 22-23 conference. Hosseini then explained: "We have analysed all the contracts in the market right now, all available, beneficial models, and this is what we have come up with. This is a good model, with flexibility".

Hosseini said Iran was giving priority to investment in common fields shared with neighbouring states such as Iraq and Qatar, and work on those deposits will be remunerated at the higher fee. The IPCs for these fields will give incentives to extend the life of fields and the recovery rate for oil and gas.

Iran is seeking to gain expertise. Thus, the IOCs will have to train nationals to boost local capabilities in petroleum E&P. NIOC is mostly keen on IOCs' reservoir management, crude oil, natural gas and LNG marketing on international markets, and financial management of cost-reduction measures in all the phases of the E&P business. Tehran is also keen on developing LNG export ventures out of major gas fields, as well as out of offshore South Pars, an extension of Qatar's North Field.

In addition, Hosseini said, was NIOC's keen on sharing with IOCs E&P stakes in other countries. So bidding IOCs offering such sharing will be given preferences over others, because NIOC wanted to become an IOC. He said such an international holding firm owed by NIOC will be registered in an appropriate country.

Hosseini says the higher fees to be paid will be also for fields producing extra-heavy crude oil or in difficult areas like the Caspian Sea.

A detailed presentation of Iran's E&P offerings will be made by the Petroleum Ministry in September 2014. All Ministry and NIOC top executives relating will be there, with each of them to make a presentation on a specific aspect of the industry. Hosseini will be the top co-ordinator for the conference. This is where all the necessary details of the IPC will be explained. He says he hopes the first auction round will be held shortly after that event - provided that by then the sanctions will have been lifted, or at least the 5+1 powers will have announced their intent to lift the sanctions.

Deputy Petroleum Minister/NIOC Managing Director Roknoddin Javadi and Hosseini say they hope the preferred IOCs will be in the lead of companies to become involved in the proposed JVs: BP, Chevron, Conoco, ENI, ExxonMobil, Gazprom, LUKoil, Repsol, Shell, Statoil and Total. Other key men to be involved in the auction rounds and decisions concerning the choice of winning bidders include the following members of NIOC's Board of Directors:
Dr Ali Emadi, an alternate member and head of NIOC's Research & Technology Division.

Dr Habib Aminfar, primary member and a leading Iranian scientist graduated in engineering from MIT.

Dr Hormoz Ghalavand, primary member and top geologist heading NIOC's unit.

Abdol-Muhammad Delparish, primary member and head of integrated planning Div.

Mohsen Ghamsari, primary member and head of International Affairs (marketing).

Mahmoud-Reza Firouzmand, alternate member and head of legal affairs.

Hamid Bovard, primary member and CEO of National Iranian South Oil Co.

Abdol-Reza HosseinNejad, managing director of Petroleum Engineering & Development Co. (Pedec), who has been representing NIOC in all the E&P projects as well as the partner of the operating IOCs or locals like PetroPars and PetroIran.

NIOC VP for Finance & Ali Kardor. He is under the Financial Affiars & Investment Div. and board alternate member Ghair Movahedzadeh.

The priority oilfields to be offered for JVs to IOCs - other than those shared with the neighbouring countries - include the following:

Ahwaz, the largest, which NIOC says has a production capacity of 800,000 b/d but producing much less. NIOC wants the recovery rate of its Bangestan Fm raised to the maximum possible under the most advanced EOR system. Also in the priority list are all the other fields having reservoirs connected to Bangestan - i.e., like Ahwaz whose reserves are put at 18bn barrels. Marun, having a capacity of 500,000 b/d and reserves of 22bn bls. Gashsaran, with a capacity of 500,000 b/d and reserves of 16bn bls. Agha Jari, having a capacity of 200,000 b/d and a gas-based EOR system, with reserves of 17bn bls. Karanj, having a capacity of 170,000 b/d. Bibi Hakimeh, with a capacity of 130,000 b/d and reserves of 6bn bls. Parsi, with a capacity of 80,000 b/d. These are among the onshore fields to be offered. The offshore fields to be offered will include Salman (connected to Abu Dhabi's offshore Abu al-Bukhoush field), Forouzan and the Sirri group.

Kardor says IOCs entering into E&P ventures in Iran will not be able to count Iranian petroleum reserves among their assets. But they will be allowed to report any section of their IPC-based contracts which are not mutually determined as being confidential - for example they will be allowed to mention their revenues from their Iranian operations. He says IOCs could be allowed to wholly own Iranian oil services companies as part of the country's privatisation programme. A number of such services companies will be privatised and a list of them will be made public once relevant arrangements have been completed.

Roknoddin Javadi on Sept. 20, 2013, was elevated to the rank of deputy petroleum minister and NIOC managing director, succeeding Ahmad Qalebani who in April 2010 was given this post by Ahmadi-Nejad to replace the respected veteran petroleum expert Seifollah Jashnsaz. Born in October 1957, Javadi has a MA in management and under-graduate degrees in electronic engineering and other fields. He previously held the posts of CEO of National Iranian Gas Export Co. (NIGEC), the huge National Iranian Gas Co. (NIGC), Oil Industries Engineering & Construction Co. (OIEC). Years earlier he was general manager of NIOC's Engineering Department, director of the London-based Kala Naft, and head of other NIOC departments in Tehran.

As head of NIGEC, Javadi was promoting major LNG export ventures in partnership with IOCs. He tried hard but failed to get any of these projects off the ground because they depended on US liquefaction technology which Iran could not get because of crippling American sanctions. He also promoted major gas pipelines to supply Europe, which could not materialise because of many US, EU and UNSC sanctions.

In March 2014, Javadi said mis-management by the IRGC-controlled government of Ahmadi-Nejad and the numerous sanctions had caused long delays in many oil and gas E&P projects. He explained: "Non-implementation of the projects in recent years have not been only due to the sanctions as incorrect planning and lack of management monitoring have also pushed the development projects into these conditions". He added that the petroleum industry's staff [under Ahmadi-Nejad's presidency] had been required to show more interest in this industry We don't have to develop the oil production cycle from the very beginning. We have to use the past experiences and then through national and international knowledge, production and development should reach sustainable status".

Javadi said engineering, procurement and execution were the three categories which should have been taken into account for maintenance of oil production capacity. He said had appointed qualified advisers for that purpose since he became NIOC's CEO in 2013. But, he said, the structural damages by then had become so serious that these expert could not do much without the use of advanced technologies which they had not obtained. By late 2013, Javadi had appointed special E&P expert Ghulam Hussein Ashrafi, who had been recruited by the Manufacturing Support and Procurement unit of Kala Naft in London, as his adviser for solving such problems. "But", he added, "alone he could not do much. He needed the use of technology which we lacked".

In 2014, on the other hand, NIOC's exploration unit found more extensions to the onshore West Karun group of oilfields near the Iraqi border. Subsequently, different upstream units within NIOC co-ordinated with the state firm's Department Comparative Planning to re-evaluate the potentials of the West Karun cluster of fields and concluded that together they could be developed to produce 400,000 b/d (see omt15IranFields13Apr15).

Javadi in early 2015 said the West Karun group's development would require $6bn, which were to be provided gradually by the National Development Fund of Iran (NDFI). The funding began to be released in late March 2015 as part of a phased programme, according to Moshtagh-Ali Gohari, the deputy managing director for comparative planning at NIOC. According to the plan for West Karun, the NDFI funding of $6bn was to be done in three Iranian fiscal years, to March 20, 2018. Gohari said the money was being provided on NDFI's behalf by a company called SPV, a unit of the Oil Industry Retirement Fund.

As soon as SPV signed a written commitment to approve the money transfer, NIOC's unit in charge of the West Karun group in early 2015 began awarding development-related contracts to qualified Iranian firms. (NIOC, as a state-run organisation, is not legally authorised to receive funds directly from the NDFI. Thus, SPV was the vehicle to receive and distribute the funds proportional to the project's progress. The first contracts signed were for the drilling of wells. These were separate from five oil wells which were to be drilled in the nearby South Azadegan Oilfield (see gmt15IranFields13Apr15).
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Publication:APS Review Downstream Trends
Geographic Code:7IRAN
Date:May 4, 2015
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