Iran unveils contract model

The Ministry of Petroleum unveiled the draft model of its new oil and gas contracts, which is aimed at drawing more foreign companies to the Iranian hydrocarbon sector. The Iran Petroleum Contract (IPC) was announced in Tehran by Mehdi Hosseini, who heads a ministry-appointed committee to revise oil contracts.

‘In the new contracts, different stages of the petroleum industry (exploration, development, and production) are commissioned in an integrated manner,’ Hosseini told a forum organised to introduce the contracts.

The IPC is replacing buy-back contracts, which are no longer attractive to foreign companies. Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces.

Under the IPC, the National Iranian Oil Company will form joint ventures in crude and gas production with international companies to manage projects, provide financing, and maximise hydrocarbon recovery, Hosseini said.

The official emphasised that the new contracts will offer higher fees for riskier exploration and production projects but that ‘ownership of reservoirs is not transferrable. Under new contracts, Iranian experts will work shoulder to shoulder with foreign investment companies in order to become familiar with the latest technologies of the world.’

The new contracts are also intended to raise the recovery factor of Iranian oil fields, half of which are in their maturity period. Iran needs US$150 billion of investments in its upstream oil and gas industry in the next five years, and the share of foreign investment in the contracts therefore had to increase.

Iran expects to attract US$100 billion in investment in its energy sector over the next four years after the new model takes effect.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2014 Menas Associates

Algeria: Sonatrach exercises pre-emption rights in Petroceltic's farm-out

Petroceltic confirmed on 7 October that it has received formal notification that Sonatrach is exercising its rights under the Isarene Production-Sharing Contract ("PSC") to pre-empt the Company's proposed sale of an 18.375% interest in the PSC.

The commercial terms and proceeds of pre-emption are similar to those agreed between the Company and a potential third party purchaser and comprise a US$20 million payment on completion, a US$140 million development and two contingent payments of US$10 million each based on the achievement of certain early production and technical completion milestones. Following the completion of the transaction, Sonatrach will hold a 43.375% participating interest, Petroceltic will hold 38.25% and Enel will hold the remaining 18.375%.
 

Petroceltic CEO Brian O'Cathain said: "The decision by Sonatrach to exercise its pre-emptive right is a clear indication of the current value and long-term upside potential of the Isarene asset. Since 2005, Petroceltic has enjoyed an excellent relationship with Sonatrach and we believe that this decision represents a positive endorsement of the technical, commercial and development work undertaken over the last nine years. Sonatrach's decision to pre-empt confirms that the timely development of the Ain Tsila field is strategically important to Algeria and we look forward to working together to achieve this shared objective."
 

Sonatrach and Petroceltic are currently working to finalise all the necessary regulatory approvals to facilitate the signing of the amendment to the PSC. Petroceltic said further announcements will be made as appropriate.
 

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.
 

© 2013 Menas Associates

Mauritania: Kinross strike ends

The 10-day strike, which began at Kinross' massive Tasiast gold mine on 8 August, has ended. According to the company, the strike had “minimal” impact on gold production. It has, however, been reported that amid the 10-day shutdown, rating experts at the Bank of Montreal downgraded Kinross and removed the expansion of the Tasiast mine from the company's production forecasts.

About 1,500 workers, representing 98% of the mine's labour force, were reported to have walked off the job on 8 August in demand of better health coverage and respect for Mauritania's labour code. The conflict seems to have begun when managers demanded the mine remain in operation during Eid al-Fitr. The strike, called by Mauritania's main trade union confederation the CGTM, has been resolved under terms that have not been made public.

 

The International Trade Union Confederation, with which the CGTM is affiliated, is demanding "urgent clarification" on the fate of one worker allegedly found dead under "obscure circumstances" near the mine site during the strike.

 

For more news and expert analysis about Mauritania, please see Mauritania Politics & Security.

© 2013 Menas Associates