Iran security body reviewing new IPC oil contracts

REUTERS/Heinz-Peter Bader Apr 9, 2017

DUBAI (Reuters) – Iran’s top security body is still reviewing the Iran Petroleum Contract (IPC) model, Oil Minister Bijan Zanganeh was quoted as saying on Sunday, as the contracts aimed at attracting foreign investors appear to face fresh delays.

In January, Iran named 29 companies from more than a dozen countries as being allowed to bid for oil and gas projects under the IPC, which Tehran hopes will boost production after years of sanctions.

But the IPC model has been delayed several times due to opposition from hardline rivals of President Hassan Rouhani.
“The new oil contracts (IPCs) are currently being reviewed by the Supreme National Security Council,” Zanganeh told parliament, the students’ news agency ISNA reported.

Zanganeh did not elaborate or say how long the review might take, ISNA and other agencies reported.

The IPC model ends a buy-back system dating back more than 20 years under which Iran did not allow foreign firms to book reserves or take equity stakes in Iranian companies.

Oil majors have said they would only go back to Iran if it makes major changes to the buy-back contracts, which companies such as France’s Total or Italy’s Eni have said made them no money or even incurred losses.

The IPC has more flexible terms that take into account oil price fluctuations and investment risks, a senior Iranian oil official told Reuters in November.

(Reporting by Dubai newsroom; editing by Alexander Smith)

Iran struggles to expand oil exports as sea storage cleared

By Jonathan Saul/Apr 6, 2017

LONDON (Reuters) – Iran has sold all the oil it had stored for years at sea and Tehran is now struggling to keep exports growing as it grapples with production constraints, shipping and oil sources say.Since the easing of international sanctions in January 2016, Iran tried to make up for lost sales by releasing millions of barrels parked on tankers offshore.

Tanker tracking and oil sources said Iran had sold its last stocks from the floating storage in the past two weeks. Much of the oil stored was condensate, a very light grade of crude. With no more stocks at sea, Iran has lost a vital resource that had propped up exports.

“We do think that (floating storage) has been the primary cause of the boost in exports,” Energy Aspects analyst Richard Mallinson said, adding that now floating storage had ended total exports of crude and condensate were likely to slip. “We see a very difficult path for Iran to raise crude output until it can get the Western expertise and investment back into the upstream, which has been notably slow to materialize,” he added.

After Western sanctions were eased, Iran’s output jumped from about 2.9 million barrels per day (bpd) to about 3.6 million bpd in June.

But it has barely risen since – fluctuating between 3.6 million and 3.7 million bpd – even though Iran fought hard with fellow OPEC members to be excluded from production cuts that came into effect on Jan. 1 and will last till June.

The Organization of the Petroleum Exporting Countries pledged to reduce output by about 1.2 million bpd, but Iran was allowed a small increase to compensate for years of isolation. Yet it has produced less in the past three months than it was allowed.

Iranian Oil Minister Bijan Zanganeh said last month Tehran was prepared to produce 3.8 million bpd if OPEC agreed to extend cuts to the second half of 2016, effectively signaling there was little hope of a steep rise in Iranian output.

NEED FOR INVESTMENT

Prior to the lifting of sanctions, Iran stored unsold oil on ships, which peaked in 2015 at 40 million barrels on around 25 tankers. The country has up to 60 oil tankers in its fleet.

Iran’s drawdown of floating storage gathered pace in September. By the start of 2017, Iran still held an estimated 16 million barrels of oil on ships. Since then, they have emptied.

While the EU and United Nations lifted sanctions on Iran over its nuclear program more than a year ago, the United States has held separate measures in place and President Donald Trump’s administration has promised a tough line. This has increased concerns among Western banks about offering finance to Iran, slowing energy investment decisions. French oil company Total said in February it planned a final investment decision on a $2 billion gas project in Iran by the summer, but said this hinged on a renewal of U.S. sanctions waivers.

“The uncertainty over the U.S. position on further sanctions is casting a huge shadow on the oil trade with Iran,” said Paddy Rodgers, chief executive of tanker company Euronav. In addition, the oil minister’s efforts to secure deals with Western firms has run into internal opposition in Iran, which holds the world’s fourth biggest oil reserves. The plans have now been postponed until after a May presidential election.

“Iran needs billions of dollars of investment to boost crude oil production and natural gas capacity,” said Mehdi Varzi, a former official at state-run National Iranian Oil Company and now an independent consultant.

“Most of the fields were discovered many decades ago and are way beyond their production capacity,” he said.

(Editing by Dmitry Zhdannikov and Edmund Blair)

U.S. granted BP licence to operate joint North Sea field with Iran

BUSINESS NEWS | Thu Apr 6, 2017 | 2:06pm BST

BP (BP.L) and Iran’s state-run oil company received a licence from the U.S. Treasury last year to operate their joint gas field in the North Sea following the lifting of Western sanctions on Tehran, BP said on Thursday.

Production at the Rhum field was suspended in 2010 when Europe imposed sanctions on Iran over its nuclear programme and only resumed four years later after Britain agreed to set up a temporary management scheme whereby all revenue due to Tehran would be held until sanctions were lifted.

Following the removal of European Union and United Nations sanctions on Iran in January 2016, the temporary management scheme ceased.

Iran regained control of its stake and on Sept. 29, 2016 BP obtained a licence from the U.S. Treasury, through its sanctions enforcement arm – the Office of Foreign Asset Control (OFAC), to continue operations at the field, BP said in its 2016 annual report.

BP, which was founded more than a century ago as the Anglo-Persian oil company, has multiple business operations in the United States and therefore needs an OFAC licence to avoid potential breaches of existing U.S. sanctions.

Last year BP created an executive committee to explore business in Iran, which would exclude its American chief executive Bob Dudley in a bid to avoid potential sanctions violations.

London-based BP recorded a net profit of $31.6 million (25 million pounds) in 2016 from its 50 percent stake in the field, which supplies around 4 percent of Britain’s gas demand.

“BP currently intends to continue to hold its ownership stake in the Rhum joint arrangement and act as operator,” it said in the annual report.

While international sanctions on Iran were removed more than a year ago, the United States has held separate measures in place and President Donald Trump’s administration has promised a tough line.

BP did not specify for how long the Rhum field licence was valid.

Previous U.S. President Barack Obama tried to encourage non-U.S. companies and non-U.S. banks to increase trade with Iran, although Tehran said Washington did not do enough to ease its access to international financial markets and banks for vital capital after years of isolation.

(Reporting by Ron Bousso and Jonathan Saul; Editing by Toby Davis)