Iran will invite international oil companies (IOCs) to bid on the development of its South Azadegan field on 21 October, according to the managing director of National Iranian Oil Company (NIOC), Ali Kardor.

South Azadegan will be the first tender under the new Iran Petroleum Contract (IPC) model, aimed at attracting more interest from overseas firms to the country’s oil and gas sector.

“Next week, we will be sending invitations to foreign companies and ask them to announce if they are interested,” Iran’s Press TV reported Kardor as saying.

The IPC allows companies working on oil and gas fields in the country to remain operators after the capacity has been developed, with no ceiling on capital expenditure (capex).

Priority field

The South Azadegan field, located in western Iran on the border with Iraq, is one of the joint fields that NIOC aims to prioritise by utilising technology and investment from IOCs.

Other priority oil fields to be tendered under the IPC include Yaran and Yadaravan, Minister of Petroleum Bijan Zanganeh was reported as saying earlier this week.

China National Petroleum Corporation (CNPC) was contracted to develop the South Azadegan and North Azadegan fields in 2009, but was removed in 2014 due to a lack of progress. The South Azadegan development was proposed to add a total of 320,000 barrels a day (b/d) of new capacity.

Since the Azadegan field was discovered in 1999, it has been developed to an estimated production capacity of just 40,000 b/d, according to MEED’s Opportunity Iran 2016 Report, released earlier this year.

The report found that Iran has more than 1 million b/d of planned capacity in projects either on hold or significantly delayed amid contract difficulties with IOCs.

Controversial plans

Plans for the IPC were launched by the government of Hassan Rouhani, who was appointed in August 2013, but have proved controversial among hardline factions of Iran’s political establishment.

The IPC was created to replace the buy-back contracts introduced in the 1990s, which have largely proved unsuccessful both in terms of profits for IOCs and in hitting deadlines for field developments.

The key changes to the contracting model – which was ratified by Rouhani’s cabinet in early August – include longer contract terms to a maximum of 20 years from the start of development; foreign investors can be involved in operating fields during production; the remuneration fee is set at a dollar-a-barrel amount linked to market prices to encourage production efficiency; incentives for higher-risk fields and enhanced oil recovery (EOR) projects; and incentives for the transfer of technology.

Due to political opposition, the IPC is only expected to apply to shared fields, meaning the majority of Iran’s fields will be offered under the buy-back model or engineering, procurement, construction and finance (EPCF) deals.