Iran seeks interest in $2.7bn gas development

29 April 2015

Buyback contract offered to develop five onshore fields in southwestern Fars province

  • Firms given until 27 May to prequalify
  • Client seeking local-international joint ventures
  • Sanctions challenging for interest from overseas

Iran has asked companies to prequalify to bid for an estimated $2.75bn contract to develop onshore gas fields in the Fars province in the southwest of the country.

State-owned Iranian Central Oil Field Company (ICOFC) has given interested firms a deadline of 27 May to prequalify for the tender.  

ICOFC is looking for a company to study and develop five gas fields on a buyback contract.

The scope of services includes master development plan (MDP) preparation, seismic studies, drilling, surface and sub-surface activities, operations, and pipelines.

The project includes the estimated $1.18bn development of the Aghar gas field to a production capacity of 20 million cubic metres a day (cm/d).

ICOFC is also looking for a company to develop the Day, Sepidzakhor, Halegan and Sephid Baghon fields to a production capacity of 32 million cm/d. This work is estimated to cost a total of $1.57bn.

Both sections of the development are expected to take 36 months to complete.

The tender is open to joint ventures of local groups and international oil companies (IOCs), with at least 51 per cent owned by the local partner.

Iran has struggled to find IOCs to work on its oil and gas field developments in recent years due to sanctions against its banks and oil industry.

Last year, the Islamic Republic cancelled a $2.5bn agreement with China National Petroleum Company (CNPC) to develop the Azadegan oil field in the southwest of the country. CNPC was also replaced by local group Petropars to complete phase 11 of the giant South Pars gas field development.

Tehran had announced plans to scrap buyback contracts like the one tendered by ICOFC on the Fars onshore gas fields.

In buyback contracts, IOCs must hand operations over to state-owned National Iranian Oil Company (NIOC) once production has commenced.

The recently proposed Iran Petroleum Contract (IPC) aims to replace the use of buyback contracts and is based on the integration of exploration and production operations. Under the contract, exploration is at the sole risk of IOCs, which recoup all the exploration costs once commerciality is established.

The IPC model is expected to be rolled out should the Iranian nuclear negotiations reach a successful conclusion and sanctions against IOCs working in Iran are removed.

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