Iran signs deal with Russia’s Zarubezhneft to develop two oilfields

Iran LouiseOnce completed, the project is set to create jobs for Iranians. (Image source: skeeze/Pixabay)The National Iranian Oil Company (NIOC) has signed an agreement with Russia’s Zarubezhneft and its Iranian partner Dana Energy for the development of two oilfields jointly owned by Iran and Iraq, according to Iran’s news agency Shana

Aban oilfield is located 38 km southwest of the city of Dehloran, and Paydar-e Gharb field is situated 150 km northwest of the oil-rich city of Ahvaz and 35 km from Cheshmeh-Khosh processing facility in Ilam Province. Their current production together stands at 36,000 bpd.

Under the 10-year agreement it is envisaged that the two fields will produce up to 48,000 bpd, with an accumulated output of 67 million barrels over ten years. The Russian company has an 80 per cent share of the deal, with the rest held by its Iranian partner. The cost of the development of the two fields is estimated at US$674mn, with indirect costs estimated at US$68mn.

Once operational, the project will create technical jobs on a large scale in Ilam Province, says Shana, particularly workshops to repair and rebuild ESP pumps. Furthermore, Zarubezhneft is expected to transfer its enhanced oil recovery (EOR) technology to Iran.

Speaking at the signing ceremony, Iran’s oil minister Bijan Zanganeh said that Iran has had deals with Russians for buying technical oil services previously, but this is the first such deal for crude oil production on EPC terms and “we hope it will not be the last one.” He added that NIOC talks are ongoing with other Russian companies such as Tatneft, Gazprom and Lukoil.

The minister also predicted that the coming calendar year beginning March 21 will be a very busy year for Iran’s oil industry, with ongoing talks with developers reaching fruition and expected to bear results.

The agreement comes at a time when the dismissal of US Secretary of State Rex Tillerson, has heightened the political uncertainty surrounding the Iran nuclear deal.

“It is unclear how Zarubezhneft's investment would be affected by possible snapback of US secondary sanctions. But it is notable that it is a Russian state-owned enterprise making this move in the uncertain environment,” comments Esfandyar Batmanghelidj, founder of Iran-focused news and analysis website Bourse & Bazaar.

Developing the oil and gas fields it shares with neighbouring countries is a priority for Iran. The deal is the second major international deal to be signed under the new IPC model of oil contracts, which offers more favourable terms to developers than the old buyback model, and follows Total’s landmark  US$5bn deal to develop Iran’s South Pars gas field, signed in July 2017. 

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