�� Fate of the nationBurdened by years of international sanctions, Iran is in dire need of foreign investment, particularly in its energy sector.

�� Land of opportunityHome to the world’s fourth and second oil and gas reserves respectively, Iran presents unique opportunities to firms throughout the value chain.

�� Stiff competitionInvestors from China and Russia lead the queue, but Tehran is also keen to attract players from Europe, the Americas and elsewhere in Asia.

�� Contract overhaulTo make the terms of carrying out E&P work in Iran more lucrative, a new model has been developed, the Integrated Petroleum Contract.

Iran Investment Special Report

£1,000 May 2015

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Have a question or comment? Contact the editor – Ian Simm (ians@newsbase.com)Copyright © 2015 NewsBase Ltd. All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

C O N T E N T S

Iran: opportunity knocks 4

M I D S T R E A MGas: supply and demand 6

I N V E S T M E N TChina and Russia move first, Europe keen to follow 8

F I E L D F O C U SAzadegan 12South Pars 14Yadavaran 16Northern Iran 18

E X P O R T SIran’s role as a supplier 19

P E T R O L E U M P O L I T I C SRe-emergence puts relations under spotlight 20

S E R V I C E SSanctions experience to be key in future collaboration 21

C O N T R A C T SA brief history of Iranian oil contracts 23

A V A I L A B L E P R O J E C T S 24

L O C A L C O N T A C T S 32

A P P E N D I X 1Breakdown of the Integrated Petroleum Contract (IPC) 34

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Iran’s hydrocarbon wealth moves within reach for IOCsNewsBase’s Iran Investment Special Report - the ideal partner for future investments in the Islamic Republic’s hyrdocarbon sector

THE agreement struck between the five perma-nent members of the UN Security Council plus Germany (P5+1) and Iran on March 2 paves the way to a comprehensive deal to begin lifting sanctions in late June. Iran has been off limits to most foreign investors for most of the last dec-ade and is home to the second and fourth largest reserves in the world of oil and gas respectively. It is unsurprisingly regarded as El Dorado by many international corporations, particularly those in the energy sector.

Should a final agreement be reached between Tehran and the P5+1 on the former’s nuclear programme by the June 30 deadline, interna-tional oil companies will scramble for stakes in the biggest and best projects in Iran, of which there are many.

In preparation for this, in May NewsBase will publish its Iran Investment Special Report, which, in addition to the usual quality analysis and insight, will include maps, field profiles, project information and contact details, enabling your company to prepare for future investments in the country’s hydrocarbon sector.

NewsBase’s Middle East Editor, Ian Simm, and his team of reporters, analysts and experts are working with senior industry executives to prepare a comprehensive handbook for oil and gas investment in Iran.

Topics covered in the report include:

• Risk• Key Players• Investment• Field Profiles• Export Options• Services• Pipelines• Projects & Tenders • Influential Local Contact Details

With several weeks until publication, the team would like to offer you the opportunity to request the inclusion of information that may be of particular interest to you and your company to ensure you derive maximum value from the report. As a valued NewsBase customer, we are also happy to offer you a 15% discount on our list price of US$1,495.v

We have been almost alone in the industry in reporting the likelihood of a breakthrough in the prolonged nuclear discussions between the P5+1 and Iran.

The agreement marks a major sea-change in the relationship between Iran and the international community that has been characterised by increasing sanctions from the US, EU, and UN, since the Iranian Revolution of 1979.

Our customers are decision-makers in some of the world’s largest and most successful companies and organisations, and they rely on NewsBase to provide them with insight they cannot find elsewhere. Should a deal be agreed by June 30, the gates to ‘El Dorado’ will open, and these companies will look to their information providers to establish possible investment opportunities.

Our Iran Investment Special Report will seek to do exactly that, presenting information on a variety of available projects, while assessing some of the country’s main oil and gas fields and midstream ventures.

We believe that Iran will be able to increase its oil output by up to 300,000 bpd by the end of 2015, utilising existing infrastructure, with further increases coming once foreign investment filters down to the country’s ageing oil and gas hardware.

For more information on this report, please e-mail newsbase@newsbase.com or email me directly - ian@newsbase.com.

Ian SimmMiddle East Editor

NewsBase

F R O M T H E E D I T O R . . .M A J O R F I E L D S :Iran’s major oil fields include:• Azadegan• Yadavaran• Ferdows/Mound/

Zagheh • Marun • Ramin• South Pars Oil Layer• Band-E-Karkeh• Mansour Abad• Changoleh• Azar• Esfandiar• Ahvaz • Aghajari • Gachsaran

I R A N ’ S I G AT N E T W O R K :• IGAT1 – Bid Boland

Refinery to Astara• IGAT2 – Kangan

Refinery to Qazvin• IGAT3 – Asalouyeh to

northwest Iran• IGAT4 – Asalouyeh to

Fars and Esfahan• IGAT5 – Asalouyeh to

Khuzestan• IGAT6 – Asalouyeh to

Khuzestan• IGAT7 – Asalouyeh to

Hormozgan Province and Sar-Khoon Refinery

• IGAT8 – Asalouyeh to Parsian Refinery, Esfahan and Qom

• IGAT9 – (Europe Gas Export Line) Asalouyeh to Turkish border

SOUTH PARS:

Producing:Phase 12 joins phases 1-10 in producing a combined 300 mcm per day. Output from these phases is expected to reach a peak of 354 mcm per day.

Expected:Phases 11 and 13-24 are expected to come on-stream by 2022, and will eventually add a further 431 mcm per day of produciton, taking the total to 785 mcm per day.

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BY 2019, Iran needs around US$150 billion in investment in upstream and downstream indus-tries to allow it to optimise the development of its current oil and gas fields.

This is the view of the government and state-run enterprises, which also envisage shorter-term requirements of investment and technological expertise to reach Tehran’s target of restoring oil exports to the pre-2012 level of 2.5 million barrels per day – from around the current 1.1 million bpd – within two months of UN sanctions being lifted.

Although relations between Iran and China have been bumpy in the oil and gas sector, the fact that Beijing has consistently disregarded international exports sanctions on Iranian hydrocarbons and has been heavily involved in developing and investing in the country’s oil and gas industry explains why Iran’s Oil Minister, Bijan Zanganeh made his first visit to the Chi-nese capital since assuming his post in 2013.

Tehran claims that Beijing owes Iran around US$50 billion for supplies, which cannot be paid while sanctions remain in place.

On the other hand, Beijing has said that Chi-nese firms are owed for work carried out on Ira-nian oil and gas fields.

The ties that bindChinese involvement in Iran’s hydrocarbons sec-tor looks likely to continue in light of the increase at the end of 2014 of China’s investment quota in Iran’s hydrocarbons sector development projects to more than US$52 billion from its previous US$25 billion.

This move was followed by comments last week by the head of Iran-China Joint Chamber of Commerce, Assadollah Asgarowladi, in Teh-ran, who said that even in the event of a nuclear deal: “The West will not take the place of China in our market, and neither Iranian traders nor the Chinese are the least concerned about Iran’s agreements with the West.”

Underlining this was the announcement last week by senior Iranian officials of a landmark visit to Tehran by China’s President Xi Jinping in the near future, with the exact date to be con-firmed this week.

According to Asgarowladi, trade with China over the last 12 month period had already hit the US$52 billion level limit and, with the start of the Sixth Five-Year Economic Development Plan starting in March 2016, Iran is determined

to raise the volume of trade with China to US$60 billion over that year.

Under the present sanctions regime, the bulk of committed investment from China has been directed downstream, towards Iran’s petrochem-icals sector, and here there is a perfect conver-gence of interests between Tehran and Beijing.

From Iran’s perspective, the grand plan, as delineated by deputy managing director of Iran’s National Petrochemical Co. (NPC), Mohammad Hassan Peyvandi, at the beginning of 2015, is to increase its annual petrochemical production to 180 million tonnes per year (tpy) by the end of 2022, from the current capacity of around 60 million tpy, if sufficient feedstock is available.

The projected cost of this would be around US$30 billion.

From China’s side, the appetite for petro-chemicals products is growing, as it continues with its broad strategic plan to shift its economy away from being manufacturing-led to being consumer demand-driven.

The most tangible example to date of this was the announcement at the beginning of February that China is to invest up to US$4.5 billion, initially, in Iran’s petrochemical sector, with the managing director of the NPC, Abbas Sheri Moqaddam, stating shortly after that, as of the middle of February, a total of 18 pet-rochemical projects had been introduced to China for financing. These are the Andimeshk, Sadaf, Ilam, Salman Farsi, Fasa, Jahrom, Darab, Miandoab, Gachsaran, Golestan, Ardabil, Siraf, Zanjan, Kaveh, Sabalan, Lordegan, Bushehr, and Masjed Soleyman projects, with the latter four of these having already received sizeable monetary disbursements.

Tehran looks to deepen China ties ahead of sanctions removal

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Tit for tatA large portion of this initial funding is to be used to resume operations at the second phase of the Assaluyeh petrochemical plant development project as, upon completion of this, according to the original NPC plan, the onshore installations of the giant South Pars gas field would increase petrochemical production capacity in the region to 55 million tpy, with Assaluyeh’s accumulated production capacity from first and second phases providing around 55% of Iran’s total pet-rochemical production capacity.

The 9.2 trillion cubic metre South Pars field, in fact, is also a subject up for discussion during Zanganeh’s visit, NewsBase understands from senior sources in Tehran, as state-run China National Petroleum Corp. (CNPC) last week expressed an interest in returning to the offshore project, having seen its involvement on the 3,700-km, site, which accounts for around 40% of the country’s estimated 33.8 tcm of natural gas reserves, end in 2012/2013.

NewsBase understands that the reason CNPC’s contract to develop Phase 11 of South Pars was cancelled – and the reason why Iran also cancelled its US$2.5 billion contract with CNPC to develop the South Azadegan field in 2014 – was that Tehran was dissatisfied with the rate of progress on both.

There were also concerns about the quality of technology being used by the Chinese firms. For its part, CNPC has said that it was sanctions that made it difficult to obtain the optimal equipment needed from US and European companies.

In a bid to resolve this, Mohsen Ghamsari, director of international affairs at the National Iranian Oil Co., said last week that Iran would seek gas liquefaction technology from European firms, while CNPC’s contribution would focus on developing and producing gas.

Collaboration pays offThis division of responsibilities appears to be working now in the development of the North Azadegan field, in which CNPC is still involved, and for which Iran had also previously noted dis-satisfaction with the project’s progression.

China is also still highly involved in the four-phase development contract for the 1.6 tcm North Pars gas field (that would eventually include a 20 million tpy LNG plant) due to come online around 2020, despite the original contract having been cancelled by Iran as China paused its activities when sanctions first kicked in. In this respect, NewsBase understands that the contract has been re-assigned to China National Offshore Oil Corp. (CNOOC), although the project does not yet appear in its corporate statements.

This working framework is also likely to be employed in utilising Chinese money and on-the-ground development in expanding output from the West Karoun area in the south-west of the country, which are expected to add 280,000 bpd to existing output by the end of the current Iranian calendar year (March 19, 2016). With the aforementioned short-term post-sanc-tions target, and Zanganeh’s plan to increase crude oil output to 5.7 million bpd by 2018 from its 157 billion barrels of proven oil reserves (the world’s fourth-biggest), Iran’s Petroleum Engi-neering and Development Co. (PEDEC) said last week that the first development phase of the fields will be implemented over the course of four years.

Once the second development phase has been completed, West Karoun is expected to add over 1 million bpd to the country’s output, according to PEDEC’s managing director, Abdolreza Haji Hossein-Nejad, making the development of the West Karoun oilfields among the priority pro-jects of Iran’s Oil Ministry.v

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