Iran clears 29 foreign companies for oil and gas exploration

Iran clears 29 foreign companies for oil and gas exploration
The new contracts are expected to attract more than $40bn in foreign investment.
By bne IntelliNews January 5, 2017

The National Iranian Oil Company (NIOC) has issued a list of 29 companies that have qualified to bid in oil and gas tenders.

The full list comes ahead of the tender for Iran's first official Iran Petroleum Contract (IPC) for the South Azadegan oil field in the Persian Gulf later in January. NIOC is planning to put out a round of tenders for several other upstream oil and gas contracts in the coming weeks, with some already signed before the official list comes out.

The IPCs are expected to attract more than $40bn in foreign investment. The country’s deputy petroleum minister, Amir Hossein Zamaninia, said in August 2016 that the country would ink new oil contracts worth billions of dollars before the next Iranian election in May 2017.

Iran has been mulling which foreign companies can invest in the country’s vast oil and gas industry, believed to have the fourth largest oil reserves and second largest gas reserves in the world.

Iran is well aware that the US is only a matter of days away from the presidential inauguration of Donald J. Trump, and has filled the list with Russian and Asian names as a back-up plan should things go awry. Trump repeatedly said through his election campaign that he would “tear up the Iran deal”, as he claimed the nuclear deal was unfair to US businesses.

The full list includes many well-known oil majors, including France’s Total, Anglo-Dutch Shell, Italy’s Eni, Russia’s Gazprom Neft and Lukoil, China’s Sinopec and CNPC, Denmark’s Maersk, Austria’s OMV, and US Schlumberger, Iran’s energy news agency Shana announced.

Other foreign companies include Cepsa of Spain, Japan’s Petroleum Exploration and Mitsue, Korea Gas Corporation, and Malaysia’s Petronas to name of the few others.

Omitted from the list, because of fears over the impending Trump administration was BP, whose CEO is a US citizen.

Under the terms of November 2015’s Joint Comprehensive Plan of Action (JCPOA) or nuclear deal, US entities and its citizens remain excluded from trading with Iran, without prior permission from the US Office of Foreign Assets Control.

BP could have sought an exemption from the ongoing US sanctions, as did many of the other Western majors. However, in a quote in Britain’s Financial Times the company said there are several other opportunities in other countries for the time being.

Schlumberger, the US oil drilling company, was the only US company to make the Iranian list, through an Austrian subsidiary.

There are several Chinese companies on the list. These are perceived as a safe long-term bet because they are immune to sanctions if they were to be placed on the country again.

However, European and Japanese companies are known in the country as good partners due to their level of professionalism, while Iran has had a mixed history of dealing with the Chinese.

In November 2014, Iran tore up a contract with China’s state-run CNPC over frustration with the pace the Chinese were developing the North Azadegan oil field.

The deal for the oil field was cancelled due to “unacceptable delays”. In that project, CPNC had to drill 185 holes in the field but had only bored a small number by the time the contract was cut.

With sanctions on the way out in November 2015, Iran introduced Iran Petroleum Contracts (IPCs), replacing buy-back agreements. These offer more flexible terms to take account of oil price fluctuations and investment risks to make the sector more financially attractive.