Iranian company beats off Pedec for a greater say in developments
The National Iranian South Oil Fields Company (Nisoc) has won a long-running battle for greater responsibility in developing new oil reserves in the country's main producing region by being put in charge of the early production phase of the giant Azadegan oilfield project.
The decision by the National Iranian Oil Company (NIOC) is a partial blow to the Petroleum Engineering&Development Company (Pedec), the NIOC subsidiary that has long been overseeing new projects and buy-back deals with foreign companies.
Nisoc's entry also raises questions about the fate of a pre-qualification tender being run by Italy's Saipem for Azadegan's surface facilities.
Ahwaz-based Nisoc has always argued it can oversee and carry out development projects better than outsiders, including Tehran-based Pedec.
The NIOC decision means it will be overseeing Azadegan's early phase production, although it is unclear if there is a new official output target.
Under the original $1.7 billion development contract held by Japan's Inpex, which last year reduced its 75% stake to 10% under political pressure, Azadegan was to start early production of 50,000 barrels per day in 2009, rising to an eventual 260,000 bpd. Azadegan has proven reserves of about 7 billion barrels.
Under Nisoc, the early production level "might be reduced...it could be anywhere from 10,000 bpd to 30,000 bpd", said one source in Tehran.
"Nisoc's role could be limited to the early production phase, depending on how things proceed," he added.
There could also be further delays in the already late overall project, as Nisoc reviews existing subcontracting work covering early production.
In particular, a consortium of Saipem, Marubeni and Iranian company Sazeh has just completed the first stage of a pre-qualifier for subcontractors.
The Saipem-led group received its $700 million engineering, procurement, construction and management contract from Inpex in 2005, and has been carrying out some work despite not having finalised the deal, sources said.
This arrangement has evolved under Petroiran Development Company (Pedco), an NIOC subsidiary designated early last year by Nico International as service contractor at Azadegan. Nico is NIOC's financing unit and raised its 25% stake in Azadegan to 90% last year after Inpex's partial pullout.
Saipem received proposals for its pre-qualifier last week and was expected to draw up a short list for a full tender next year.
The engineering, procurement and construction job includes the central treatment plant, pipelines and other surface facilities.
Procurement of long-lead items is not included and comes under the responsibility of the client, the source said.
Other surface facilities tenders for gas injection and utilities, including a 130 megawatt power plant, have yet to be issued. The National Iranian Drilling Company was last year awarded the $300 million contract to drill 37 wells.
Iranian construction giant Jahanpars was in November awarded a $95 million contract to carry out civil works, including preparation of well sites.
"Nisoc seems certain to review Saipem's role...given its long-stated stand that local companies can do such jobs adequately and even better than foreign companies," the source said.
Saipem could find itself eliminated from the job or see its role downgraded, with Marubeni and/or Sazeh perhaps taking over, he said. Nico had been looking for a foreign stake-holding partner after Inpex's decision last year.
Talks were held with France's Total and Chinese companies, and more recently with India's Essar Group and Russia's Lukoil.
However, Nisoc's entry into the equation might reduce the possibility of a new foreign role.
The decision to put Nisoc in charge of Azadegan represents a partial victory for the fiercely autonomous regional oil companies, which have long opposed too much reliance on foreigners.
"As far as is known, Pedec retains responsibility for all other such projects," the source said.
By Vahe Petrossian
© Upstream 2007
