Iranian MPs' Attempt to Cancel Total's Deal Fails
A move has failed by some Iranian members of parliament (MPs) to block the multi-billion dollar investment in South Pars by Total and partners.
Just a week after the deal was signed by National Iranian Oil Company (NIOC) with the Total-led consortium, pressure from President Hassan Rouhani’s rivals mounted, with some MPs backing a resolution to cancel the deal. But some withdrew their support July 12 and a vote to annul the deal was cancelled. Some of the MPs had criticised it alleging “unfair payments to foreigners as well as Total’s big stake in the project”.
Iran’s oil minister Bijan Zanganeh though took part in a July 12 parliamentary meeting to defend the South Pars phase 11 (SP11) redevelopment contract, announced July 3 by Total, during which he gave extra insights on drilling costs and the expected tax-take from the consortium.
The 20-year deal was signed based on newly designed contract model, called Iran Petroleum Contract (IPC), which allows foreign contractors to possess a percentage of production for 20 years or more. The deal is aimed to produce 20.5bn m3 /yr (2bn ft3/d) of gas as well as 80,000 b/d gas condensate and other products from SP11 in a 20-year period, extendable for further five years.
Zanganeh said that the exact value of the project is $4.8bn deal, while annual revenues from the project would be more than $5bn. “Some 335bn m3 of methane, 290,000 bbls of gas condensate, 26mn metric tons of ethane, propane and butane as well as 2mn mt sulphur are expected to be produced from phase 11, with a value of $85bn based on $50/bbl oil price and a $200/'000 m3 [$5.55/mn Btu] Iranian gas export price now, of which 14% or $12bn is expected to be paid to the consortium in 20 years”.
He added that the overall revenues of this project until the end of production would reach $130bn.
Well costs to be reduced
Zanganeh said that some $2.479bn would be invested in the first stage (over 40 months) to drill 30 wells at a cost of $31mn per well. This would be cheaper than other phases of SP where drilling costs have been $41.1mn-$41.6mn per well. In addition two platforms would be installed, and two parallel 32-inch-diameter pipelines -- each of 136 km in length -- as well as service pipes.
The second stage also aimed to construction a 20,000-ton platform with several huge compressors in 60 months to to maintain the production level after 2023, when the pressure of reservoir decrease. He said that currently Iran uses below 3,000-ton platforms and the technology of construction of huge platforms is neither in Iran, nor in regional countries.
Iran can also expect tax revenues from Total/CNPC
Zanganeh also said that the government would gain $1.02 billion tax from contractors.
Total is currently studying the whole of field to assume how is it possible preventing production fall after 2023 and probably 15-20 huge platforms with $25-30bn worth would be needed for South Pars. Zanganeh said that Iran doesn’t have enough fund to develop neither SP11 nor other projects.
Before, Iran's oil ministry announced that it has $50bn debts to contractors, while it has defined $200bn worth oil and gas projects over the next 5 years.
Zanganeh said that 70%-75% of the needed funds is expected to be attracted from abroad.
Total is the operator of the SP11 project with a 50.1%, alongside the Chinese state CNPC 30%, and NIOC-owned Petropars 19.9%.
Asked why he had signed a deal with Total without issuing a formal tender, Zanganeh said that Total was the only foreign company ready to participate in this project, along with its Chinese partner CNPC, and “therefore, issuing a tender was meaningless”.
Dalga Khatinoglu