Iran signed preliminary agreements with Russia’s Gazprom on Tuesday to develop two major oilfields in the latest of a flurry of deals with foreign firms, local media reported.

The deals open the way for Gazprom to carry out studies at the Cheshmekosh and Changouleh fields near the border with Iraq, according to the Shana news agency, which is linked to the Oil Ministry, AFP reported.

That adds to five other oilfields that have already been earmarked for Russian firms Lukoil, Tatneft and Zarubezhneft.

The latest deal was signed by Russian Energy Minister Alexander Novak, who is visiting Tehran with a 590-strong business delegation.

Russia and Iran are keen to deepen their economic relationship.

Iran has announced a slew of energy deals with foreign firms in recent weeks, despite uncertainty around the incoming US administration of Donald Trump, who has vowed to take a more confrontational stance toward Tehran.

Last week, Anglo-Dutch giant Shell signed an initial accord to explore two of Iran’s largest oilfields at South Azadegan and Yadavaran, as well as the Kish gas field.

That followed an initial deal with France’s Total last month to develop part of the South Pars gas field – a project worth an estimated $4.8 billion.

But doubts persist over how these deals will be financed so long as Iran remains frozen out of the international finance system by continuing US sanctions.

The government has announced that Iran’s energy infrastructure urgently needs an infusion of foreign cash, technology and know-how.

Russia Keen to Participate in Iran’s Oil, Gas Projects
Russian Energy Minister Alexander Novak said on Tuesday that Moscow is keen to participate in Iran’s oil and gas projects.

He made the remarks in the Iran-Russia trade forum in Tehran.

Iran and Russia will continue cooperation in execution of development projects in the oil and gas sector, the official added.

He said that Iran and Russia will promote cooperation in construction of gas, electric and nuclear power plants.

Iran and Russia are keen to enhance all-out ties, Novak added.

He referred to removal of Islamic Republic’s sanctions and said the ground is now ready for Russia’s investment in Iran’s oil and gas projects.

The two countries enjoy good capacity for promotion of cooperation, Novak added.

He said that the volume of cooperation between the two states is increasing.

Iran and Russia enjoy longstanding cooperation in energy fields and they can work together in fields of construction of nuclear, electric and gas power plants, the minister added.

He said that central banks of Iran and Russia have taken good steps forward resolution of banking problems.

Russia will cooperate with Iran to develop its Bushehr Nuclear Power Plant and electrify its railroads, Novak added.

He said Moscow is ready to sell superjet planes to Iran.

National Iranian Gas Company (NIGC) and Russian Gazprom Neft on Tuesday signed a Memorandum of Understanding (MoU) for cooperation.

Managing Director of the NIGC Hamid-Reza Araqi and Deputy Managing Director of Gazprom Alexander Medvedov signed the deal in the presence of Iran’s Minister of Communications Mahmoud Vaezi and Russian energy minister.

The two sides decided to form five working group with regards to the extent of the working fields. The working groups corresponded and held talks on trade of gas, R&D, production and implementation of the joint projects and gas application.

In the meeting, the projects of investment in Iran were outlined and it was announced that Iran is ready to absorb more than 62 billion dollars investment in the NIGC projects in the coming years.

With lapse of almost one year since the first working session, the two sides signed the MoU based on outcome of their expert sessions.

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National Iranian Oil Company (NIOC) will sign into three accords with France’s Total and Royal Dutch Shell over development of three oil and gas fields of Iran.

Following the signing of an Agreement in Principle (AiP) with France’s Total S.A. company on development of South Pars Phase 11, the French firm will seal two more agreements today with NIOC.

One contract to be inked between the two sides today on Wednesday December 07 pertains conducting studies and development of Azadegan joint oilfields.

The accord follows an earlier meeting in December between Iran’s Oil Minister Bijan Zanganeh and Chairman and CEO of Total Patrick Pouyanné held on the the sidelines of OPEC summit in Algeria where the two sides mulled over venues to develop South Azadegan oil field.

NIOC and France’s Total had also sealed a confidential disclosure agreement in March in order to develop Iran’s South Azadegan joint oilfield with Iraq and the French side was required to present its technical bid in six months’ time.

Earlier, the Project Director of the Development Project of South Azadegan Seyyed Mahmoud Mar’ashi estimated that the required volume of investment for the project will be less than five billion dollars in order to reach a daily production of 300 to 320 thousand barrels of crude oil.

In the current time, about 50 thousand barrels of crude oil is being extracted from the joint oil field while completion of the first developmental phase will raise the output to 100 thousand barrels per day by the end of the current year.

In addition to the deal on Azadegan, another agreement is slated to be signed with Total over expansion of Kish gas field as one of the NIOC Recent Discoveries which was discovered in 2006.

A total of 12 wells have so far been drilled in Kish gas field, which is a giant independent field close to Kish Island in the Persian Gulf, and three developmental phases have been defined to realize five billion cubic feet of gas.

The third contract, however, will be endorsed today between NIOC and Royal Dutch Shell on development of Yadavaran joint oilfield. It remains noteworthy that the first phase of development in the Iranian field has been carried out by Sinopec of China.

With completion of Phase 1 of North Azadegan oilfield, in collaboration with China National Petroleum Corporation International (CNPCI), the production at Yadavaran joint field has also surged to 115 thousand barrels per day as a result of cooperation with Sinopec.

Oil production at the joint oilfield with Iran has currently reached 115 thousand barrels which exceeds the initial commitment made for the first developmental phase by approximately 30 thousand barrels.

Yadavaran oilfield has a reservoir of 17 billion barrels and a potential to produce 300-400 thousand bpd of crude.

Iran’s Oil Minister Bijan Zanganeh had previously said the MDP of phase II of North Azadegan and Yadavaran oilfields has been approved by Chinese contractor SINOPEC and China National Petroleum Corporation (CNPC) under an initial contract, adding “Iran is ready to hold multilateral negotiations with Chinese companies within its accepted framework.”

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President Hassan Rouhani launched the first phase production at three fields in the oil-rich Khuzestan Province, bringing its total crude output closer to pre-sanctions levels.

“Oil production west of Karun must reach one million barrels per day,” Rouhani said on Sunday, referring to the North Azadegan, Yadavaran and North Yaran fields. “This is a realistic goal, and we need investment and technology,” IRNA reported.

Output at the fields west of the Karun River rose from 65,000 barrels per day in 2013 to about 250,000 barrels per day.

Iran had expected to reach that output target by the end of the year, Mohsen Ghamsari, director for international affairs at the National Iranian Oil Co., said in September.

North Azadegan is presently producing 85,000 bpd. Production from Yadavaran and North Yaran stand at 115,000 bpd and 30,000 bpd, respectively.

Accordingly, Iran’s production from oilfields on the western bank of the Karun River, that includes the above fields, has increased by above 250,000 bpd.

Iran awarded North Azadegan to the China National Petroleum Company (CNPC), Yadavaran to China’s Sinopec, and North Yaran to Iran’s Persia Oil and Gas Development Company through contracts worth $2.5 billion, $3 billion and $0.6 billion, respectively.

Rouhani said that Iran needs a total investment of at least $18 billion to develop all West Karun fields as well as the latest technology to guarantee increased oil recovery at the fields.

He noted the Ministry of Petroleum has effectively used the investment potentials created after the removal of sanctions in January under a nuclear deal, known as the JCPOA, with six world powers.

The president added that more work still needs to be done to further increase the country’s production of crude oil.

The oilfields in West Karoun are Yadavaran, North Azadegan, South Azadegan, North Yaran, and South Yaran. The biggest among all are South Azadegan and Yadavaran which are shared with Iraq’s Majnoon and Sinbad fields, respectively.

Officials have already emphasized that a long-term plan has been devised to increase production from the fields to above one million bpd.

Iran has approved a new oil contract model to lure foreign investors, although the details have not been made public.

France’s Total SA reached an initial agreement to develop a natural gas field in Iran last week, becoming the first international oil company to sign a deal under the new energy contracts.

Foreign investment

Elsewhere in his remarks, President Rouhani said foreign investment is needed for full prosperity in the post-sanctions era.

“The nuclear deal created a new situation that ushered in fresh breathing air for Iran,” Rouhani said. “The oil industry has been a leading body in taking advantage of the new opportunities.”

“In the post-sanctions era, many said it would take years before Iran’s oil production could reach 2 million barrels per a day, but within a few months, the hardworking managers and engineers at the oil industry worked miracles and returned the country’s production to the level before the sanctions were imposed,” he said.

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Iran said on Sunday it will soon sign six agreements with international energy giants over the development of its oil sector projects.

Gholam-Reza Manouchehri, the deputy for engineering and development affairs of the National Iranian Oil Company (NIOC), specified neither the companies nor the projects. Nevertheless, he did indicate that the projects were large scale.

The foreign companies will play a central role in the development of major fields.

Manouchehri further emphasized that the companies that won oil sector deals in Iran would have to team up with locals, IRNA reported.

“The foreign companies will play a central role in the development of major fields,” said Manouchehri. “Still, they will have to use the help of Iranian companies for their projects.”

The official also added that Iranian companies can be only the project leader for the development of small fields and can use the help of foreign enterprises.

Elsewhere in his remarks, Manouchehri said that Iran has so far signed memorandums of understanding (MoUs) with 10 companies over the development of certain oil sector projects. However, he did not name the companies and the projects for which they have signed the MoUs.

Last week, the NIOC invited eligible international companies to participate in the pre-qualification phase of a tender for 50 exploration and development targets across the country.

The targets include a variety of low and average risk oil and gas fields. They include lucrative oil targets like South Azadegan, Changuleh, and Ahwaz-Bangestan as well as promising gas fields such as Kish, Farzad-A, North Pars, Golshan and Ferdowsi.

The tender is a central part of Iran’s plans to increase its production to above four million barrels per day – the same level that existed before a series of draconian US-led economic sanctions were imposed against the country in 2012. /IRAN-DAILY

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Iran Oil minister has said contractor companies would only receive agreed amounts if they increase the recovery rate in Iranian oil fields.

Bijan Namdar Zanganeh told the press on Tuesday morning that at least $100bn in investment were required to revive the industry to fresh conditions where Iran’s excavation companies would provide services to other countries.

Zanganeh was speaking to the press on the sidelines of an agreement with Pars Oil and Gas Company (POGC) to work on four massive oil fields as the first deal after reforms introduced to overall scheme of oil contracts.

 Iran oil minister: “The industry currently requires $100bn in upstream section.”

“Iranian domestic companies would provide engineering services in oil and gas to other countries; a priority is also put upon improving the well recovery rate of Northern and Southern Yaran, Koupal, and Maroun,” Zanganeh added. “The industry currently requires $100bn in upstream section; we believe mergers and new offshoots of excavation and exploration companies would not weaken the mother holding, but would also attract investments and facilitate inflow of new technologies; the ultimate outcome would be improved and increased production and revival of antiquated oil wells.”

Zanganeh also said that development of South Azadegan oilfield was a priority post-JCPOA times; “currently, the recovery rate in Sarvak formations in shared field is mere 5 per cent, virtually rendering the remaining 95 per cent to other predators; other fields including Rag Sefid, Asmari, Koranj, Pakdel, Shadegan, etc., are in the queue for new contractors, with 600 billion barrels of crude in West Karoun massive field, and with only 150 billion barrels extractable with current recovery rates,” he detailed. /MNA

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By Karen Gilchrist: Iran signed a $5-billion deal with a consortium led by French oil company Total on Monday to develop the giant South Pars Gas Field — the world’s largest natural gas field.

The deal is the Islamic Republic’s first with a European oil company in more than a decade, marking a major milestone for a country whose standing as an international trade partner has hung in the balance ever since it was slapped with sanctions in 2006 amid concerns that it was developing nuclear weapons.

Total has taken a 50.1 percent interest in the South Pars project, and alongside state-owned China National Petroleum Corporation, which holds 30 percent, and Iran’s Petropars (19.9 percent), will begin producing gas for the Iranian market from 2021.

Though the deal has been a slow burn, coming some 18 months after EU sanctions against the Middle Eastern nation were lifted, Iran will be hoping that it marks a new era of investor confidence and a particular boon for its dwindling oil production.

“Total’s decision to sign the South Pars 11 contract is a cautiously positive sign for foreign investment in Iran’s upstream,” Richard Mallinson, geopolitical analyst at Energy Aspects, told CNBC via email on Monday.

Who else is ready to invest in Iran?

Already, India, one of Iran’s most steadfast trading partners, on Monday announced that a consortium of domestic businesses would offer up to $11 billion to develop another of Iran’s natural gas fields, Farzad-B field, and create the infrastructure to export the fuel, Bloomberg reported, quoting Narendra Kumar Verma, managing director of the overseas investment unit of India’s largest explorer, Oil and Natural Gas Corp. (ONGC). / Farzad B gas field, Persian Gulf

Iran is the second-largest supplier of crude oil to India, and, as a result, India is one of the largest foreign investors in Iran’s oil and gas industry. However, fraught diplomatic relations between Iran and other states have made it a difficult relationship to uphold.

Under US sanctions, which were reinforced last month, India has been unable to trade with Iran using the dollar — the world’s premier reserve currency — and had to defer payments or revert to payments in rupees and, more recently, euros.

Iran has the world’s largest natural gas reserves and the fourth-largest oil reserves, according to the US Energy Information Administration. This translates to 10 percent of the world’s crude oil reserves and 13 percent of OPEC’s.

Why is Total doing the deal now?

Total was previously one of the biggest investors in Iran before sanctions were imposed. Though the deal was laid out last year, the group has been awaiting clarity on the Trump administration’s stance on sanctions.

During campaigning, President Donald Trump pledged to ‘dismantle’ the 2015 nuclear agreement, which aimed to reduce sanctions, though has not yet followed up on it.

Total has so far only committed to an initial $1 billion investment, citing continued risks. The stock was up 1.78 percent when the deal was signed Monday.

Though the investment will help revive Iran’s antiquated energy sector, which has borne the brunt of years of under-investment into the country, it will be purely domestically focused.

It is likely to have less of an impact on the wider international markets, which have been struggling to balance output since a supply glut saw prices plummet in early 2015.

Brent prices were lower by 0.06 percent in Monday afternoon at $48.75 per barrel while US crude was up 0.09 percent at $46.08 per barrel.

Lack of new deals holding back growth

Indeed, while companies including Royal Dutch Shell and Italy’s Eni have signed provisional agreements with Iran, according to the FT, the path ahead to recovering Iran’s energy sector looks far from smooth.

“Other developments are not so positive,” said Mallinson, citing Azadegan, another Iranian oilfield project which has suffered continued delays amid uncertainties over Iran’s trading future.

“The tender for the Azadegan oilfield was supposed to be imminent but was then pushed back by three or four months to give foreign companies more time for analysis. This suggests that the major firms that Tehran really wants to attract are largely not ready to commit to Iran deals.

“Currently Iran’s oil production has flat-lined and each new delay to the return of foreign investors pushes back the timeline for further growth in output,” Mallinson added.

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China‘s Iranian crude oil imports may rise to a record this year as state-owned oil firms lift more crude through their upstream investments while extending their current supply contracts, senior industry and trading sources said.

Chinese firms were expected to lift between three million to four million barrels more Iranian oil each quarter in 2017 than last year, four sources with knowledge of the matter estimated. That would be about five percent to seven percent higher than the 620,000 barrels per day (bpd) of Iranian crude the country has imported during the first 11 months of 2016, according to the customs data.

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), won an exemption from the group’s production cuts agreed to on Nov. 30 and may raise output slightly.

China’s demand for foreign crude could touch new highs as state-run refiners start up new plants and as Beijing allows more independent refiners to import crude, with the country forecast to remain a key driver of 2017 demand growth.

State refiner Sinopec Corp and state-run oil trader Zhuhai Zhenrong Corp, the two biggest Chinese lifters of Iran’s oil, are set to roll over annual supply agreements with National Iranian Oil Co (NIOC), with combined volumes of about 505,000 bpd, two sources with knowledge of the agreements said.

Additionally, China National Petroleum Corp (CNPC) and Sinopec expect to lift more oil this year from two oilfields they operate under service contracts, the sources said.

A press official with Sinopec said the company does not comment on operational matters. CNPC and NIOC did not immediately respond to requests for comment.

Sinopec signed a development deal for the Yadavaran field in late 2007 with CNPC signing a deal for the North Azadegan field in 2009, after Japanese and European companies pulled out of the projects, both in the southwestern Iranian province of Khuzestan, due to sanctions over Iran’s nuclear program.

Both fields started pumping oil in early 2016, with North Azadegan reaching full production in the third quarter and Yadavaran in the fourth quarter, and they are currently pumping at around 160,000 bpd.

“The terms of return on investment are still being finalized …but it’s safe to say Sinopec is going to lift more from Yadavaran this year than last,” said a Beijing-based oil executive familiar with Sinopec’s operations on Yadavaran.

A separate senior trading source estimated that Sinopec could lift about four million barrels of Yadavaran crude, considered a heavy grade with an API gravity rating of about 25, every quarter this year. The person did not give an earlier comparison.

After first shipments last October, CNPC is expected to lift an average of about three million barrels from North Azadegan each quarter, said a second senior trader with knowledge of CNPC’s Iranian production. /Reuters

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