Iran Grants Development of Two Oil Fields to a Russian Company

On Wednesday, March 14, the National Iranian Oil Company signed a $741 million contract with the Russian state company Zarubezhneft for the development of the Aban and West Paydar oil fields. According to the official website of the National Iranian Oil Company, Zarubezhneft, along with Dana Energy, will develop these two fields. These fields have been active for several decades, with a current combined production of 36,000 barrels per day. The Russian company will hold an 80% stake, while Dana Energy will have a 20% stake in the development aimed at increasing oil production. This contract is the second development contract for Iranian fields under the new oil contract model known as IPC, following the development of Phase 11 of South Pars with Total France. Zarubezhneft signed a memorandum of understanding with the National Iranian Oil Company on July 12, 2016, to study these fields. The goal of this contract is to achieve a maximum daily production of 48,000 barrels per day and to produce approximately 67 million barrels over the next ten years. The Aban field has been producing oil for about eight years, and the West Paydar field has been producing for 23 years. The total in-place reserves of these two fields are approximately one billion barrels. The National Iranian Oil Company states that this contract can be extended for a maximum of another 10 years by mutual agreement. According to this report, the estimated capital costs for the development plan of the Aban and West Paydar fields are equivalent to $674 million (including direct capital costs and costs for repairing and replacing downhole pumps), with indirect costs estimated at $68 million. Under the new model of Iran's oil contracts, foreign companies must participate in tenders and take over the project after winning, but in the two contracts signed with Total and Zarubezhneft, due to the lack of interest from other companies in developing these projects, the contracts were signed without going through the tender process, as there is practically no competition among companies for these projects. Besides Zarubezhneft, other Russian companies such as Gazprom, Lukoil, and Tatneft have signed memorandums of understanding with Iran to study several oil fields, but no contracts have been signed yet between the parties.