Iran replaces Gazprom with local consortium

Iran has replaced Russia’s Gazprom Neft with a local consortium and suspended a gas contract with the China National Petroleum Corporation International (CNPC) as it struggles to speed up development of its oil and gasfields.

Western oil and gas majors, such as France’s Total and Royal Dutch Shell, have not invested in Iran’s energy sector in recent years because of sanctions over the country’s nuclear programme and Tehran’s undesirable contract terms.

Iran has in the past turned instead to Asian and Russian companies. However, the shift does not appear to have boosted production.

Oil analysts suspect Iran’s oil production capacity has fallen from more than 4m barrels per day in 2005 to bout 3.6m bpd owing to the depletion of old fields and long delays in development of oil and gas projects. Tehran claims that its production capacity remains largely unchanged.

It is not clear why Iran could not reach an agreement with Gazprom over Azar, a field in western Iran that is jointly held with Iraq. A memorandum of understanding covering the field was signed in November 2009.

Iran’s oil ministry on Tuesday signed a $1.9bn contract with the Oil Industries’ Engineering and Construction, a partially state-owned oil contractor, and the Oil Pension Fund Investment Company to produce 65,000 bpd from Azar within five years.

Rostam Ghasemi, Iran’s oil minister, said on Tuesday that “foreign companies did not show much interest” in developing the Azar field and insisted that Iran could not engage in prolonged negotiations over fields that are jointly held with neighbouring countries.

The government also announced that it had “temporarily suspended” a contract with CNPC over North Pars gas field in southern Iran.

Moussa Souri, the managing director of Pars Oil and Gas Company, which operates the two Pars fields, said resumption of work in North Pars was conditional on the Chinese company’s progress in phase 11 of South Pars. The latter is the world’s biggest gas field, and is Iran’s highest priority energy project.

The delayed development of South Pars has deprived Iran’s old oilfields of gas injection needed to raise pressure and contributed to their falling production levels.

Iranian oil analysts insist that government mismanagement and a purge of experienced oil officials in recent years, rather than sanctions, are also to blame for what they see the critical condition of the country’s oil and gas sectors.

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