Iran opens oil tender to investor applause
01:24 p.m Jul 01, 1998 Eastern
By William Maclean
LONDON, July 1 (Reuters) - Iran unveiled an unprecedented array of
energy projects to Western and Asian investors on Wednesday, naming 43
exploration or development ventures worth of over $5 billion in oil and
gas.
Reaction from some 450 U.S., European and Asian energy executives to
Iran's largest foreign oil and gas tender since the 1979 Islamic
revolution was excited and inquisitive.
''It's the opportunity of the century -- the next century,'' said Peter
Wells, director for new business at Britain's independent LASMO Plc.
''I'm sure NIOC (National Iranian Oil Company) will be flooded with
bidders,'' said Mehdi Varzi of Dresdner Kleinwort Benson.
Iran's Deputy Oil Minister for International Affairs Mehdi Husseini,
opening the three-day seminar, said potential future OPEC oil output
curbs would not threaten the projects.
He said the developments, a bigger than expected list of work including
17 exploration projects, would help raise oil output capacity to seven
million barrels per day (bpd) in 2020 from an official 4.1 million bpd
currently.
He said rates of return under Iran's so-called buy-back system were up
for negotiation and offered limited risk and low costs.
Iran is luring foreign investment to procure Western technology to help
in development, exploration and enhanced oil recovery projects to stem a
slide in production from ageing fields.
It says more than 20 billion barrels of oil could be found in addition
to Iran's existing hoard of more than 90 billion barrels, the world
fifth largest reserves. Iran has the world's second largest reserves of
gas after Russia.
An added attraction is the inclusion of the first onshore offerings in
Iran's upstream sector since 1979, when foreign oil companies left as
the revolution turned violent.
U.S. companies have been showing greater interest in Iran over the past
six months despite being subject to a 1995 ban on U.S. trade nd
investment in Iran.
European companies are especially eager to exploit a decision last month
by the United States to waive sanctions against a $2 billion project in
Iran led by France's Total to develop stages two and three of the big
South Pars gas field.
In a surprise development, the tender list did not include stages four
and five of the South Pars gas field -- a major development that is the
focus of stiff competition between Anglo/Dutch giant Royal Dutch/Shell
and Russia's RAO Gazprom.
Husseini added possible future curbs on output resulting from Iran's
OPEC membership would not affect the planned developments in offshore
and onshore oil and gas exploration and production.
''It will not be a priority to cut these projects first,'' he said in
answer to questions about the effect of possible OPEC oil restrictions,
adding it would take three to five years to complete most of the
projects.
''Things will change. World oil demand will have expanded so that most
excess capacity will be absorbed. The quota system may not exist in five
years to be concerned about.''
Iran is committed to lowering its oil output to 3.318 million bpd from
Thursday from a February benchmark of 3.62 million bpd under the
Orgnisation of the Oil Exporting Countries latest efforts to support
sagging petroleum prices.
Most independent monitors say the country is unable to lift sustainable
output capacity beyond 3.8 million bpd, due in part to deterioration in
some older onshore fields that provide the bulk of oil production.
Western oil executives said they were keen to learn the detailed terms
of the projects under offer through the buy-back system whereby the
foreign participants are repaid through production.
Most potential foreign bidders are unhappy with buy-back, arguing it
reduces the role of foreign oil companies to that of engineering
companies and distorts commercial incentives and prioritices to the
detriment of the project.
They prefer to have a direct share of output and reserves that they can
book on their balance sheet. However, Iran's constitution outlaws
foreign ownership of its oil.
''The buy-back model has its place in any portfolio. It's nice to get
away from the oil price risk,'' said Torstein Sanness, vice-president
for explortion and production at Norway's Saga Petroleum.
Husseini and up to 50 Iranian officials attending the seminar from
Tehran were due to make a formal presentation of the projects on
Thursday and limited themselves on Wednesday to disclosing broad
elements of the work.
Despite being shackled by bilateral U.S. sanctions banning trade with
Iran, U.S. energy companies are being presented with opportunities on
equal terms with other foreign companies.
Husseini and Iranian Charge d'Affaires in London Gholamreza Ansari
repeated longstanding Iranian attacks on U.S. sanctions aimed at
punishing Iran for what Washington calls its support of terrorism -- a
charge Iran denies.
They said the easing of secondary curbs over the Total gas project did
not mean a change in what they called the underlying U.S. policy of
retaining an option to tighten sanctions aimed at Iran. (London newsroom
+44 171 542 7646))
Copyright 1998 Reuters Limited. |
