Munir block: "low-risk licence where commercial oil or gas is almost certain to be discovered"
Better terms add spice to licence rounds
Upstream, June 18
The National Iranian Oil Company (NIOC) can claim a modest degree of success in its licensing rounds so far. There are no spectacular results yet but neither have the exercises met the pessimists' predictions of failure, writes Vahe Petrossian.
Onshore, NIOC late last year offered 16 blocks as a first step towards licensing an eventual 51 tracts. In early 2003, it ran an offshore round in the Persian Gulf, putting eight giant blocks on offer.
In between the two rounds, the state oil company improved the terms for explorers. They would no longer be prevented from automatic access to the development phase of a commercial find and could then have a 25-year period in which to recoup their costs and make a profit.
The new approach was formalised this year by parliamentary approval of a clause to the country's post-revolution oil law. Until now, explorers had been restricted to a first right of refusal on a 30% stake in the development phase if drilling proved commercial.
Not that this restriction prevented four onshore blocks being taken on by Norsk Hydro, OMV, Edison Gas and Sinopec, with offshore acreage going to Oil & Natural Gas Corporation of India.
Hydro, later joined by Lukoil, has the highly promising Anaran block. OMV has the Mehr block while Edison, later joined by Petronas and Lundin, has the Munir block. China's Sinopec has the Zavaran-Kashan block in central Iran.
ONGC's block is the Farsi field in the Persian Gulf. These are, of course, relatively low-risk licences where commercial oil or gas is almost certain to be discovered.
The eight offshore tracts offered in January 2003 were considered high risk and not much was heard of them until recently when Petrobras said it intended to sign an agreement for the Tusan block.
There might be further interest in one or two of the other southern parcels but European experts have so far been generally dismissive of the prospects in this round.
Statoil carried out studies but decided the prospects were too small. The Iranians "left out all the good bits", says one oilman.
Had the northern part of the Persian Gulf been included in the round, the oil companies would have been rushing to Tehran in droves.
NIOC is, however, conducting further seismic and other studies in northern waters and in the transitional Abadan Plain zone to gain a more precise idea of the prospects and either carry out development on its own or issue individual tenders.
The 16 onshore blocks offered last October were seen as more promising than the eight but were not initially greeted with enthusiasm, forcing NIOC's Exploration Directorate boss Mahmoud Mohadess to put on a promotional show in The Hague in January.
A large number of foreign companies turned up to hear the details of the "improved" terms flagged by the Iranians. Interested companies came away with as many questions as answers, though.
For instance, how will performance be judged for reward or penalty, and how will Iran make the promised purchase price for oil and gas at specified delivery points more economic?
In loosening up the exploration buy-back formula to include production automatically, the Oil Ministry and NIOC had to be able to define the blocks as being in "deprived" regions that deserved special dispensation.
Ideology, as practiced in its pragmatic form in today's Islamic republic, permits such exceptions. But, by definition, the 16 onshore blocks are not in the traditional oil and gas-rich province of Khuzestan and are therefore higher-risk.
Nevertheless, some of the blocks have attracted considerable interest and proposals are expected from a large number of companies, including Hydro and OMV.
NIOC itself categorised them according to risk, setting aside five as high risk and saying that explorers could drop out before the drilling phase.
Bid submissions are to take place in July, unless NIOC succumbs to pressure from potential bidders for an extension. Officials claim large numbers have purchased data documents at prices ranging between $5000 and $40,000.
Certainly, many foreign experts, including geologists from supermajors such as Shell and Total, are known to have inspected NIOC's data. |
