Iran Seeking to Develop Caspian Sea Energy Reserves

TEHRAN (FNA)- Iran is in talks with two major Asian oil companies regarding the development of the South Caspian Sea region, the National Iranian Oil Company (NIOC) said.

NIOC has discussed the issue with India’s ONGC Videsh and Beijing’s state-run China National Offshore Oil Corporation (CNOOC), according to an announcement by the NIOC deputy director Hojatollah Ghanimifard.

NIOC is reviewing proposals to make the terms of the current contracts more attractive to international oil companies by offering them production sharing contracts for the first time, press tv reported. Under such contracts the developer is entitled to a share of production, which allows them to recoup their investment costs and make improved profits.

Over the past 20 years, the NIOC has mainly offered payback contracts to developers under which the investor will receive a pre-agreed remuneration rate for its investment. The rate is typically determined by the global price of energy and the field hitting targets, and is paid over a 25 year period.

Some developers have voiced concerns over payback contracts, saying they offer serious risks to developers since their profits depend on the fluctuating global price of energy.

Iran recognizes that the high costs of exploration in deep waters such as the Caspian Sea region may require special treatment.

“We think this region might be the exception to the rule,” Ghanimifard said. “Since it is deep water, it looks like the production cost per barrel would be much more than in other regions, say compared with the south, or the Persian Gulf.”

He also noted that Iran’s strong interest remains in developing all phases of the huge South Pars gas field, but that rising construction costs and delays to the development timetable had put off major oil companies.

“The huge increase in the cost of materials has been a big part of these delays, so it is not correct just to refer to the financial pressure which some countries are putting on us (as the reason),” asserted Ghanimifard.

The Brazilian state-run company Petrobras is currently drilling three wells in the Caspian Sea.