Iran unveils upgraded model for oil contracts

Associated Press Ali Akbar Dareini, Associated Press Iran's Oil Minister Bijan Zanganeh, center, Managing Director of National Iranian Oil Company, Roknoddin Javadi, right, head of parliament's energy committee Ali Marvi, left, and participants listen to Iran's national anthem during opening ceremony of Iran Petroleum Contracts Conference in Tehran, Iran, Saturday, Nov. 28, 2015. Iran has unveiled a new model of oil contracts aimed at attracting foreign investment once sanctions are lifted under a landmark nuclear deal reached earlier this year. (AP Photo/Vahid Salemi) syndication.ap.org Iran's Oil Minister Bijan Zanganeh, center, Managing Director of National Iranian Oil Company, Roknoddin Javadi, right, head of parliament's energy committee Ali Marvi, left, and participants listen to Iran's national anthem during opening ceremony of Iran Petroleum Contracts Conference in Tehran, Iran, Saturday, Nov. 28, 2015. Iran has unveiled a new model of oil contracts aimed at attracting foreign investment once sanctions are lifted under a landmark nuclear deal reached earlier this year. (AP Photo/Vahid Salemi) TEHRAN, Iran (AP) — Iran unveiled a new model of oil contracts Saturday aimed at attracting foreign investment once sanctions are lifted under a landmark nuclear deal reached earlier this year, and said U.S. companies would be welcome to participate. The new Iran Petroleum Contract replaces a previous buyback model, in which contractors paid to develop and operate an oil field before turning it over to Iranian authorities. Iran has sweetened the terms, hoping to bring in $30 billion in new investment. The new contracts last 15-20 years and allow for the full recovery of costs. The older contracts were shorter term, and investors complained of heavy risks and suffering losses. Investors who produced more than planned amounts received no compensation for the additional barrels. But under the new model, the more they produce, the more they will earn. Foreign investors will also have an option to extend contracts an additional five years, up to 25 years. Some 50 upstream oil, gas and petrochemical projects are being introduced during a two-day conference in Tehran that began Saturday. Iran will pay foreign oil companies larger fees under the new contracts to provide greater incentives to investors. Oil Minister Bijan Namdar Zanganeh told the conference that under the new contracts, foreign investors will be required to form a joint company with an Iranian partner to carry out exploration, development and production operations. "To continue to play the role (as a major oil supplier), we hope to enjoy working with reputable international oil companies under a win-win situation," he told the conference. Zanganeh welcomed U.S. investment in Iran's energy sector. "We have no objection to and problem with the participation of American companies. The way for the presence of these companies in Iran's oil industry is open," he said. Mahdi Hosseini, a senior official in charge of the new contracts, told the conference that the new model is an attempt to repair Iran's relations with the industrialized world. Iran is hoping to attract over $150 billion in foreign investment in five years to rebuild its energy industry. Iranian hardliners, however, condemned the new contracts as "unconstitutional", saying they will open the way for "infiltration" of the energy sector by Iran's enemies. "Zanganeh today unveiled contracts that effectively transfers the rights of exploration, extraction, exploitation and sale Iran's oil to foreign companies for 25 years," the conservative news website, rejanews.com, said. International sanctions on Iran's oil industry were tightened in 2012 over its controversial nuclear program. Western nations have long suspected Iran of secretly pursuing nuclear weapons, charges denied by Tehran, which insists the program is entirely peaceful. Under the agreement reached in July with the U.S., Britain, France, Germany, Russia and China, Iran will curb its nuclear activities in exchange for the lifting of sanctions. Oil Ministry officials said 137 foreign companies attended Saturday's conference, including Repsol, BP, Royal Dutch Shell, Total, Technip, Schlumberger, Eni, Enel, Rosneft, Lukoil, Gazprom, Inpex, Statoil and Daewoo. Iran, an OPEC member, currently exports 1.1 million barrels of crude oil per day and hopes to get back to its pre-sanctions level of 2.2 million, last reached in 2012. Iran's total production now stands at 3.1 million barrels per day. Iran is hoping to boost oil production to 5.7 million barrels a day by 2021. Zanganeh said last week that Iran will export an additional 500,000 barrels of oil a day after sanctions are lifted — likely in early 2016 — to reclaim its market share despite low prices. Iran plans to begin exporting an additional 500,000 barrels of oil a day six months later in order to double its crude exports. ======================= Fri Nov 20, 2015 | 9:56 AM EST India's Petronet near to winning better gas terms from Qatar-sources India's Petronet near to winning better gas terms...X By Oleg Vukmanovic and Nidhi Verma MILAN/NEW DELHI Nov 20 (Reuters) - India's biggest gas importer Petronet LNG is close to renegotiating a major deal with its Qatari supplier Rasgas, lowering the cost of gas shipments and avoiding a $1.5 billion penalty fee for lifting less gas than agreed, two sources said. The renegotiation is another sign of how falling oil prices and a global gas glut are bringing producing giants such as Qatar to the negotiating table. Petronet, which has a 25-year contract with Rasgas to annually buy 7.5 million tonnes of liquefied natural gas (LNG) has reduced purchases by about a third this year due to high prices -- even though it is only allowed to take 10 percent less, making it liable for a $1.5 billion penalty. Petronet and Rasgas opened renegotiation proceedings during Qatari Emir Sheikh Tamim bin Hamad Al-Thani's visit to New Delhi in March. If India manages to renegotiate a deal with Qatar it would be Prime Minister Narendra Modi's biggest diplomatic win in the energy sector since coming to power last year. Indian oil minister Dharmendra Pradhan reinforced the need to renegotiate prices and quantity under the long term deal with Qatar during his visit to Doha this month. According to the sources the two firms are exploring the possibility of altering the contract's pricing formula, in which the LNG is valued based on a 60-month average of a basket of Japanese crude oil prices. Instead, a 3-month average of Brent crude is being considered, which would be a major coup for Petronet by lowering its LNG costs in line with sharply lower crude oil prices. Petronet currently pays about $12-$13 per million British thermal units (mmBtu) for Qatari LNG under a deal that began in 2004, compared with around $7-$8 per mmBtu for LNG in the spot market. Petronet has been increasingly substituting costly Qatari LNG with spot shipments. But the proposed revision should allow it to step up Qatari imports as prices fall. Under the new deal, Rasgas will also grant relief to Petronet from paying a $1.5 billion penalty on the condition that the Indian firm lifts full volumes in subsequent years, said one of the sources. Rasgas was not immediately available for comment, while Petronet LNG's head of finance R. K. Garg did not respond to a request for comment. (Editing by William Hardy)