IPC Deferral Holding Back Oil Industry Progress

EghtesadOnline: Procrastination in concluding new oil and gas contracts with international companies not only poses a setback to the key industry but also provides neighboring states the opportunity to outpace Iran in production from shared hydrocarbon resources, deputy for downstream sector at Iran's Research Institute of Petroleum Industry (RIPI) said.

News ID: ۷۴۲۱۸۱

17 June 2017

"Most Iranian oilfields are in the second half of their operational lifecycle and the only way to enhance extraction rate is to implement enhanced oil recovery (EOR) methods with the help of foreign companies under new oil contracts," Mansour Bazmi was quoted as saying by state news agency IRNA on Friday, referring to the long-awaited Iran Petroleum Contract (IPC).

"A large number of Iranian gas and oilfields are in line to be developed, but it requires massive investment and cutting-edge technology," Bazmi said. "To do so, Tehran inevitably needs foreign funding."

According to the official, employing EOR methods to enhance the extraction rate in operational fields and shoring up average oil recovery rate is a matter of urgency as it bestows Iran a higher bargaining power in international markets, Financial Tribune reported.

"The longer the oil deals with multinationals are postponed, the more we will lag behind neighbors, most of which have expanded their fields by opening up their energy sector to global energy giants."

Tehran unveiled 50 oil and gas fields and the first details of the IPC in late 2015, but it has yet to sign the first oil deal under the new model of contracts.

Unique Opportunity

Pointing to advantages of the new model of oil contracts, dubbed as Iran Petroleum Contract, Mansour Moazzami, the head of Energy Commission at the Tehran Chamber of Commerce noted, "Joining hands with international energy majors means a unique opportunity to use domestic producers' capacity for mega projects in collaboration with industrial leaders.

"Signing long-term deals with oil giants will prove that our country is economically and politically stable, and as a result state-of-the-art technology will be transferred to the country," Moazzami noted. Household names, such as France's Total, German chemical producer BASF, Austria's OMW, Russia's Gazprom and Royal Dutch Shell are in various stages of negotiations to develop Iran's oil and gas fields.

The official dismissed critics who claim foreign companies want to plunder Iran's massive oil and gas reserves.

"We look forward to agreements that benefit both sides. A contract is a two-way street and they (foreign companies) will not bring in their money and knowhow if we don't offer attractive terms," he noted.

"New oil contracts can augment downstream industries and create at least 100,000 direct and indirect jobs in the long term," Moazzami said.

The new model of oil contracts have been devised based on "soft diplomacy" by the Rouhani administration in a bid to open up the energy sector and other key industries to foreign investment and technology.

Officials say the new contracts have more flexible terms that take into account oil price fluctuations and investment risks. IPC contracts will be used to develop large-scale upstream projects, replacing a lackluster buyback model that dominated most oil and gas projects in the past two decades.