SYD NEJAD, NAFT ENERGY INC., CALGARY
WHAT WE KNOW ABOUT THE IPC AND THE 2016 LICENSING ROUND
Is Iran worth the risk?
MORE THAN 80% of known hydrocarbon reserves worldwide
are controlled by state oil companies. To satisfy shareholders
and keep the reserves life index (RLI) high, international oil
companies (IOCs) and independents have to diversify their
portfolios with unconventional assets, which naturally demands
bringing in a mix of barrels with higher capital intensity, finding
and development costs (F&D), and operational expenditures.
Iran’s low capital expenditures (Capex) and operational expenditures (Opex) barrels are deemed to be a relief in the current
low price environment for those who dare the above-surface
risk of the country.
IRANIAN OIL & GAS FIELDS
Today more than 70% of Iran’s crude production comes from
fields with 50 years and more life. Major investment is needed
to offset the 8% to 10% decline in Iran’s 3. 2 million barrel crude
production per day and turn the curve upward.
The National Iranian Oil Company’s (NIOC’s) estimation of
the cost of Iran’s barrels is about $8 to $10 per barrel. Our analysis
suggests that F&D plus Opex of Iranian fields can have a range
of $8.0 to $16.0 per barrel of reserve.
A quick review of Iranian projects developed from 1995 to
2005 indicates that the capital-intensity of greenfield onshore
projects in Iran was around $10,000 to $15,000 per flowing-barrel.
Accounting for 3% annual inflation between 2000 and 2015,
this is about a third of the same for unconventional fields in
IRAN PETROLEUM CONTRACT (IPC)
Iran has a long history of oil contracts (Figure 1). First oil started
in 1901 under a concession that later turned into a production
sharing contract (PSC) in 1951. The latter went through revisions