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January 2017, No. 82


Oil & Gas

 

Shell, Total Sign Agreements
with Iranian Chemical Producer


Iran reportedly hoped to develop $185 billion in new oil and gas projects over the next five years, while oil ministers expect the nation’s petrochemical production to more than double in the next decade.


Royal Dutch Shell apparently hopes to capitalize on the growth of Iran’s petrochemical sector following the lifting of international sanctions.

In early October, the energy giant signed a preliminary memorandum of understanding to cooperate with Iran’s state-owned petrochemical company.

“We believe that we can have joint projects in the petrochemical field with the National Petrochemical Company,” Hans Nijkamp, who heads Shell’s Iranian affairs department, was quoted by the Iranian media as saying.

Sanctions against Iran were lifted early this year in the wake of an agreement on the country’s nuclear program, which prompted overseas energy companies previously restricted from operating in Iran to explore investments in its massive petroleum sector.

Iran reportedly hoped to develop $185 billion in new oil and gas projects over the next five years, while oil ministers expect the nation’s petrochemical production to more than double in the next decade.

Officials added that petrochemical projects — including those with Shell — could become operational more quickly than those in the energy sector.

“With the wisdom that we see in the people working in our country’s petrochemical industry, without a doubt the projects of this company will be executed sooner than oil and gas projects,” said Amir-Hossein Zamaninia, a deputy oil minister.

In related news, Director of Investment at National Petrochemical Company (NPC) Hossein Alimorad pointed to Shell’s plan to return to Iran.

 “No details have been unveiled in the draft contract as it would restrict the agreement,” highlighted the official noting that both sides are allowed to define areas of mutual cooperation.

He went on to note that Shell held ties with Iran in Gas to Liquids (GTL) refinery process before sanction years expressing hope that signing the primary MoU will deal with the unfinished project of producing natural gas products.

The NPC Managing Director Marzieh Shah-Daei and President of Department for Iran Affairs in Royal Dutch Shell Hans Nijkamp inked an MoU on October 9. 

$2b Investment by Total 

Meanwhile, France’s giant oil and gas company Total will finalize a $2 billion investment deal with Iran by the end of the current Iranian calendar year (March 20, 2017).

Adel Nejad-Salim, the managing director of Persian Gulf Petrochemical Industries Company (PGPIC), said the French company is going to invest in a downstream olefin project.

“In recent months, Total has assessed petrochemical projects in Iran and reviewed the status of feedstock. Now, their final plan is ready and the contract will be finalized in near future,” the official said.

After the implementation of Joint Comprehensive Plan of Action (JCPOA), Iran and France’s Total signed an MOU based on which, Total will invest in Iran’s petrochemical industry.

With the uplifting of the Western sanctions in January Iran aims to pump crude at pre-sanction levels.

Shah-Daei stated Iran’s plans of expanding its petrochemical production to 160 million tons from the existing 60 million tons over the next ten years. To boost its production, the company has already formed alliances with the oil giants. 

Oil Firms Present Proposals for Iran Projects 

Iran has received the first wave of proposals by major international companies to develop oil and gas projects within the new format of oil contracts recently approved by the administration of President Hassan Rouhani.

At least 10 companies have so far submitted their proposals to Iran’s Ministry of Petroleum for development of 15 projects.

They include big European names such as Total, Lukoil, Shell, Eni, OMV and Asian giants like CNPC, Sinopec and Pertamina.

Several of the key projects that the companies have targeted are the same ones they had been previously involved in or for which they had been negotiating with Iran in the past.

The most lucrative project up for the grabs may be South Azadegan for which Total has presented its proposal.

South Azadegan was discovered in 2001 in what was described at the time as the world’s biggest oil find in decades.

Next in line could be Yadavaran for which both Shell and Sinopec have presented their proposals.

Total and Shell had been negotiating with the National Iranian Oil Company (NIOC) in early 2000s over the development of South Azadegan and Yadavaran but their talks did not lead to an agreement.

Shell has also bid for re-development of Soroush oil field – located in the Persian Gulf - which it had previously developed in early 2000s.

Total, Eni and Hyundai have presented proposals for unspecified phases of South Pars gas field.  Total was already involved in the development of South Pars Phases 2 and 3.  Eni was involved in the development of Phases 4 and 5 and Hyundai in Phases 4, 5 and 6.    

Iran’s new format of oil contracts is replacing buyback deals. Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces.

But under the new contracts, the NIOC will set up joint ventures for crude oil and gas production with international companies which will be paid with a share of the output.

Under the new contracts, different stages of exploration, development and production will be offered to contractors as an integrated package, with the emphasis laid on enhanced and improved recovery.

 

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  January 2017
No. 82