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Iran
Invites American Companies to Oil Projects |
Managing director of the National
Iranian Oil Company invited the American companies to get involved in Iran’s
oil industry projects like other big companies from other countries.
Gholamhossein Nozari started his press interview with a question. “I want to
ask a question. This is a competition with a prize. Why among various economic
sectors of our country or even other countries that enjoy conditions similar
to us, the US government has only forbidden investments exceeding 20 million
dollars in Iran’s oil industry? What role can be played by our society and
government as well as the National Iranian Oil Company with regard to this
issue? This is a basic question.” Nozari was pointing to the D’Amato Act,
which was approved in 1996 and which has been renewed every year by President
George W. Bush. Immediately after ratification of that law, the American
Conoco Company withdrew from Iran’s oil industry projects.
What has been done by the oil industry
officials to attract the American companies? Are you ready to provide
incentives?
Economic concerns are of high priority to the American companies. Regardless
of what incentive that we may provide, they will not come here. If that ban
were removed, then we could have negotiated on the advantages of Iran’s oil
industry and paved the way for attraction of investments.
Do you think that the present conditions are
suitable for participation of the American companies in oil industry tender
bids? Have you considered enticements?
There is enough enticement in Iran’s oil market to attract all international
oil majors. The American oil companies can avail of this opportunity. Presence
of the American oil companies in Iran and competition with other big oil
companies can reduce prices that are quoted in tender bids and can also impact
the United States’ politicians.
Ministry of Petroleum, Frontline of Possible Sanctions: The
managing director of the National Iranian Oil Company was then asked what has
been done to cope with possible international sanctions, to which he answered,
“In case of any sanction, it seems that the Ministry of Petroleum will be at
the frontline of sanctions. We have braced ourselves for hard work. The
current contracts will continue. Oil industry has been exposed to sanctions
before, but oil majors have implemented projects here. Big oil companies have
already purchased tender bid documents for phases 19 to 22 of South Pars gas
field.”
The official mentioned taking good advantage of domestic contractors in oil
projects as a tool for dealing with sanctions, adding, “We have thought of
some solutions. Domestic contractors are capable of implementing projects.
Their capacities have risen. Domestic manufacture of equipment has greatly
progressed. In case of unwanted sanctions, their impact on the National
Iranian Oil Company will be reduced to a minimum.”
Another reporter asked, “Aren’t you concerned about the possibility that
foreign companies may withdraw from ongoing projects if conditions are made
tougher?”
Nozari said, “This has not been the case up to the present time and projects
are going on according to schedule.”
Ultimatum to Japanese: Developing Azadegan oil field is a complex
issue facing Iran’s oil industry. When Nozari was asked whether dawdling of
the Japanese company in developing the field had anything to do with possible
sanctions, he said, “They did not say anything about sanctions during
negotiations. Perhaps, they had discussed the issue among themselves.”
The former president Mohammad Khatami managed to take 3 billion dollars in
low-interest loan from Japan during his visit to that country, and in return,
gave them negotiating rights on development of Azadegan oil field. Those
negotiations led to signing a contract, despite opposition of the American
government, about two years ago. The Japanese, who had lost Saudi Arabia
Khafji oil field, focused on Iran. When oil price rose, the cost of contractor
services rose as well and the Japanese side insisted that the price mentioned
in the contract should rise. As a last stance on this issue, the managing
director of the National Iranian Oil Company said, “Due to good trade
relations between Iran and Japan, we have given priority to them and, for this
reason, our negotiations continued for 15 hours a day during the past week.”
He also announced that a deadline has been given to the Japanese company,
saying, “According to the contract, September 14 is the last deadline before
which we must reach and agreement. I hope that since both sides are willing to
cooperate, they will reach an agreement by that date because the positive
effects of the contract will not be limited to Iran and Japan.”
He said fulfilling an international contract is important to Inpex while
production from Azadegan oil field is important to Iran because is increases
overall oil production of the country.
Nozari added, “We have told officials of Petroleum Engineering and Development
Company and National Iranian South Oil Company that if an agreement with the
Japanese company was not reached, they should be ready to take charge of
developing the field by taking advantage of domestic contractors.”
Nozari said six exploration wells at Azadegan oil field have thus far,
produced 25,000 barrels of crude oil, which is a good incentive for
contractors.
Drilling Rigs Should Have Stayed in Iran: Three weeks ago, a group
representing the National Iranian Oil Company negotiated with representatives
of Romania’s GSP Company and another company from the United Arab Emirates.
The UAE company promised the Romanians to take to drilling rigs out of the
Iranian waters and, in return, own part of the company’s shares. One of those
rigs was taken out of Iran overnight, but the other one has been seized
according to a court ruling. Reporter of Shargh newspaper asked the managing
director of National Iranian Oil Company to explain about the event and he
said, “They wrote many letters to show that they were willing to either sell
the rigs to National Iranian Oil Company or to lease them. We appointed a
group of trusted persons to meet with managing director as well as chairman of
board of directors of that company…. They cannot sell the rigs because they do
not own them and have purchased the rigs on the basis of an installment plan.
Also, they cannot lease the rigs because they have already been leased by
Oriental Oil Company.”
A reporter asked, “Do you support the position taken by the managing director
of Petroiran Development Company in this regard and what is your position as
managing director of National Iranian Oil Company?”
Nozari said, “Mr. Khoei should defend his positions. They have to go on with
legal procedure. The rigs have been taken out of Iran illegally. They had
commitments that they failed to observe. We believe that they should have
stayed in Iran and fulfilled their commitments.”
Managing director of the National
Iranian Oil Company further noted that the most important challenge facing the
company is to increase recovery factor of the Iranian oil fields. He said, “We
have missioned
subsidiary companies of the
National Iranian Oil Company to offer proposals for increasing recovery factor
of oil fields.”
The official said speculations about increasing domestic oil production will
be done after the projects are implemented.
“At present, 64 oil fields are producing oil, but about 70 percent of the
country’s oil production is accounted for by eight big fields including Ahvaz
Asmari, Bibi Hakimeh, Aghajari, Rag Sefid, and Maroun,” he said.
Nozari noted that studies on eight fields are going on with cooperation of the
Iranian and foreign companies and three fields are being studied by Iranian
companies including the National Iranian South Oil Company. He added, “Average
cost of producing a barrel of oil in Iran both onshore and offshore, is 1.64
dollars, while the corresponding figure for Saudi Arabia is 52 dollars.”
Deputy minister of petroleum honestly admitted that the ministry cannot
realize the goal set by the Fourth Economic Development Plan for daily
production of 5 million barrels crude oil adding, “About 80 percent of the
country’s crude oil production is from oil fields that are in the second half
of their useful life span. Working on those fields and increasing their
production will need heavy investment.”
Nozari was then asked to explain about increasing Iran’s oil output by the end
of the Fourth Economic Development Plan to which he answered, “Achieving daily
production of 5.4 million barrels per day is quite possible.” Since most
Iranian oil reservoirs are old, the country is losing an average of
200,000-300,000 barrels of its production per years and this should be
compensated through suitable investments.
“I do nothing in the mornings to follow up two issues: firstly, the situation
of oil production, and secondly, to follow up development projects.”
Nozari further noted that doing everything on time has increase speed of
implementation of the National Iranian Oil Company’s plans. The managing
director of the National Iranian Oil Company stated that Iran is currently
producing 4.07-4.08 million barrels per day crude oil. When he as asked about
when Parsian 2 refinery will be inaugurated, he said, “We hope that the
refinery will come on-stream in October and we also hope that development
plans for Shanol and Varavi gas fields will also become operational by that
date.”
He added that development of Kish and North Pars gas fields has been approved
by board of directors of the National Iranian Oil Company and is among the
company’s priorities.
The managing director of the National Iranian Oil Company further noted that
development of Kish gas field has been given to Petroleum Engineering and
Development Company while Pars Oil and Gas Company is in charge of developing
the North Pars gas field. He said there was a possibility that Chinese
companies would take charge of developing North Pars gas field.
“We have signed a memorandum of understanding with China’s Sinopec on North
Pars gas field. The field’s gas will be converted to liquefied natural gas
(LNG) and will be sold to China,” he said, while projecting liquefied natural
gas to be produced by North Pars gas field to stand at 20 million tons.
Drilling in Caspian Sea is one of the main concerns of Iran. Due to delay in
delivering Alborz platform by SADRA Company, it seems that drilling in the sea
will not be possible before winter. The managing director of National Iranian
Oil Company said, “Drilling vessel for the Caspian Sea is being made
operational and it will be operated by Chinese companies. We are also
negotiating with Brazilian companies for exploration operations in the Caspian
Sea.”
Nozari noted that the cost of manufacturing drilling rig and its service
vessel stands at 450 million dollars. He also stated that a project which was
carried out by the Italians for reforming structure of the National Iranian
Oil Company has been stopped, adding, “The first phase of the project was
carried out by the Italians. Two to three phases were remained before the plan
could be called finalized. The contract had been signed five years ago and was
aborted two years ago.” He noted that approving new articles of association of
the National Iranian Oil Company is a precondition for any organizational
changes.
Nozari also shocked the reporters by saying that domestic gas consumption has
increased 11 percent in the summer.
“We were supposed to inject 110 million cubic meters per day gas into oil
reservoirs, but due to excessive gas consumption in the first half of the
year, we only injected 90 million cubic meters per day gas into oil
reservoirs. We usually compensated for low injection in the winter during the
summertime.”
The managing director of the National Iranian Oil Company criticized low
energy price in Iran, saying, “Energy is very cheap in our country. We have
sent 150 million cu. m. per day gas to power plants during the current year.”
Nozari said gas consumption in the country is equivalent to 72 million barrels
of crude oil and added, “If South Pars gas field had not been developed we
should have allocated all the current exported oil to domestic consumption.”
That is, in addition to 71 million barrels of crude oil which is currently
being consumed by domestic refineries, 52 million barrels should have been
added.
Nozari said domestic oil consumption currently stands at 34 million barrels
per day. Therefore, if no solution is found to reduce domestic oil
consumption, Iran’s oil exports will drastically fall in the years to come.
Nozari said, “Each year, the fuel system of some 300,000 cars is changed to
use natural gas, but we produce 700,000 automobiles a year. The Ministry of
Petroleum is also blamed for what other should be held responsible for. What
is the justification for continued operations of a power plant whose overall
output is 35 percent?”
Another reporter asked the managing director of the National Iranian Oil
Company why the company remains silent in response to reports that are
prepared by supervisory bodies, to which he answered, “We have sent written
answers to those bodies. As for 6,000 billion rials that some reports say it
has not been settled to the Treasury, has been spent on repayment of buyback
contracts and swapping crude oil with gasoline and is quite lawful. The
difference is solely an accountancy matter.”
Another reporter asked about reduced import of Iran’s oil by a Japanese
refinery and Nozari said, “Since Saudi Arabia has invested in some Japanese
refineries, it has been able to sell more oil to that country. However, it is
not true that we are facing problems with regard to selling our oil. The
Saudis have apparently offered a lower price than Iran to sell their oil to
Japan.”
Gholamhossein Nozari also offered a new analysis for high oil prices saying,
“Developed countries can tolerate oil prices as high as 100 dollars per
barrel. Japan, which was going through a long recession, is now registering a
growth rate of 3 percent. I think that since big industrial countries are
capable of managing energy consumption, they can tolerate high oil prices too.
But developing countries cannot do that…. The currently high oil prices can be
a new scenario to stymie economic growth of some countries. I think this is
the main goal because there is no problem with oil supply. They want to
prevent growth of such countries as China and India.”
The deputy minister of petroleum further noted that Forouzan and Esfandiyar
oil fields are currently producing 40,000 barrels per day crude oil. He noted
that current studies have failed to prove feasibility of further investment in
those fields. “If new studies proved feasibility of such an investment, we
will move to develop those fields,” he said.
Another reporter asked about the last situation of buyback oil contracts. The
managing director of the National Iranian Oil Company said that a 200-page
book has been written on various aspects of such contracts, adding, “Buyback
is a method of payment. The frame of buyback contracts has been mended to
match the frame of the existing contracts. Preparing a major development plan
for an oil field by the National Iranian Oil Company to be compared to major
development plan that has been drawn up by the foreign company as well as
considering various phases for development of big fields are major points that
have been added to buyback contracts.”
Nozari also sated that Iran was previously storing 14 million barrels of heavy
crude which was produced by Soroush and Norouz oil fields. “However, as we
changed Bandar Abbas refinery to use that oil as feedstock, foreign companies
indicated their readiness to buy that oil,” he said.
With regard to gas exports to Kuwait, Nozari noted that only a memorandum of
understanding has been signed for exporting gas to Kuwait and the two sides
are still negotiating to finalize the memorandum. A reporter asked whether the
contract for developing Bangestan oil field will be implemented by Petroiran
Development Company or it will be given to Mostazafan and Janbazan Foundation.
Nozari said, “Petroiran Development Company should be supported to fulfill the
contract. We have allowed other companies to engage into negotiations in
parallel to Petroiran Development Company. Mostazafan and Janbazan Foundation
has proposed to take part in the project along with a Russian company….
Petroiran Development Company had to finance the project and since we
predicted that the company will have problems with financing the project, we
are also negotiating with other companies.”
The managing director of the National Iranian Oil Company also called on
domestic companies to form consortiums before taking part in tender bids for
development of oil and gas fields. He said that the National Iranian Oil
Company is ready to give development of phases 23 and 24 of South Pars gas
field to a consortium comprising Iranian companies and added that the National
Iranian Oil Company will help them with financial issues.
The deputy minister of petroleum stated that development of Zavareh – Kashan
oil block is not economically feasible because the fourth well has not
produced desirable results. He also noted that the president has given the
go-ahead for launching tender bids on exploration and development of 24 oil
blocks, adding, “Tender bids on 12 blocks will be held in the near future.”
Nozari concluded his press conference by saying that the contract for
exploration and development of Khorramabad oil block will be finalized in one
or two weeks. The block has raised hope in increasing overall crude oil
production of Iran. |
