The existence of huge oil and gas resources and related infrastructure and easy access to high seas are among the myriad advantages of Iran that have boosted the Iranian petroleum industry. Although unjust sanctions and their consequences have stripped Iran of some of the opportunities available in the oil and gas market, the country has never lost its share in the global markets.

Development of active energy diplomacy between Iran and Russia and Russian companies is an unlimited capacity that Iran was able to achieve while neutralizing the imposed sanctions through negotiations. Accordingly, in July, National Iranian Oil Company (NIOC) and Russia’s Gazprom signed a $40 billion memorandum of understanding to develop Kish and North Pars gas fields, 6 oil fields, as well as to maintain pressure in the South Pars gas field. At the same time, the document covers operations of exchange with natural gas and petroleum products, implementation of liquefied petroleum gas projects and construction of gas pipelines.

Big Potential for Cooperation

Touching on some advantages of the Iran-Russia MOU, Minister Owji said: “Both Iran and Russia have high potentials in the oil, gas and petrochemicals fields. Fortunately, we have signed a memorandum of understanding worth nearly $4 billion for field development and $40 billion for construction of gas pipelines and LNG plants.”

“Regarding exporting products and bartering and swapping from the Caspian Sea basin, we have also started working with some Russian companies and we have capacity for nearly 10 million tonnes of bartering, swapping and exporting oil products. Last [calendar] year which ended on 20th March 2022, we exported nearly $12.5 billion of petrochemicals and catalysts to various countries, including Europe,” he added.

Owji said: “This time, we unveiled field development contracts for the Russians in the form of off-take, in which the investor is fully insured and supported by the PetroleumMinistry of the Islamic Republic of Iran. This type of contracts is very sweet and attractive for Russian investors, and considering the importance of energy, which we all know in the world today, it has created a golden opportunity to sign other contracts with the Russians in the field of energy.”

He said the Iranian government welcomed investment by Russian economic actors in the oil and gas sector, field development, swapping petroleum products and exporting petrochemicals.

150 mcm/d Gas Output Hike

The $40 billion MOU signed between Iran and Russia covers various aspects.

Hormoz Qalavand, manager of “Supervision on Oil and Gas Production Dept.” at NIOC, said: “Expansion of oil cooperation between Iran and Russia will increase Iran’s oil and gas production. At the same time, it will help advance some of the oil industry’s plans, including boosting pressure in the South Pars gas field, which is one of the major concerns of Iran-Russia oil cooperation.”

Experts believe that Gazprom's presence in southern Iran, in addition to helping enhance Iran’s oil and gas production, is a strategic response from Russia to Europe, which is implementing strategic contracts with Qatar. Therefore, although Iran benefits from this cooperation, it is also important for Russia to convert this memorandum signed with Gazprom into a contract.

Qalavand said all points mentioned in the MOU were important, adding that it would result in a 150 mcm/d gas output hike with the planned development of Kish and North Pars fields by Russian firms.

Details

Under the MOU, Russia will allocate nearly $25 billion to development of gas fields and completion of LNG projects and flare gas gathering in Iran. Furthermore, it will spend $15 billion on developing six oil fields including Karanj, Azar, Changouleh, Ab Teimour and Mansouri.

Earlier, agreements were reached with the Russians to develop West Paydar and Aban fields among others for $4 billion which includes a total of seven oil fields.

Roadmap for Cooperation

Ahmad Assadzadeh, deputy minister of petroleum for international affairs and trading, has recently travelled to Moscow to attend Russia’s Energy Week meeting.

Referring to Iran-Russia cooperation, he said: “Our cooperation with Gazprom is set in a long-term roadmap and 6 sub-working groups with Gazprom have been formed to follow up on the roadmap. The exchange of information on 6 oil fields and 2 gas fields with Gazprom has started and we hope to be able to formulate a comprehensive plan for the development of these fields soon and enter the contractual phase. We hope that the contracts will be concluded by the end of the current calendar year, which certainly requires firm will of both parties. Various issues are being followed up on with Gazprom, including in the field of LNG, research and development of oil and gas fields.”

According to him, there are two large LNG projects in Iran, which is actually a large plant with two operating rows of 5 million tonnes called “Iran LNG”, which, due to the US sanctions, the equipment and facilities needed for these two plants remain blocked by the Europeans although Iran has paid for them. If this equipment is delivered, Iranmay start these plants and export LNG.

Touching on Iran-Russia LNG cooperation, he said: “Russia has technology in this sector and negotiations have also been held with some Russian private companies in the LNG sector, and they have expressed their desire for low-volume production, and we are also very interested in working in the LNG sector.”

Assadzadeh said Iran was ready to offer facilities to Russian investors for investment in LNG, adding: “We provide facilities, land and low-cost feed to the investors of the LNG sector so that they can produce this product in the conditions of the global market, which is now like gold.”

150 mcm/d Gas Output Hike

Implementation of Iran-Russia agreement would help maintain the current level of gas production in Iran while it would help increase its gas output.

Qalavand said the planned supply of 150 mcm/d of gas from Kish and North Pars would be a key step in Iran’s gas production.

“One of the very important measures that has made the issue of maintaining and increasing production a vital issue is the discussion of enhancing pressure in the South Pars field, which is carried out in the form of an investment worth approximately $20 billion,” he said.

Referring to the significance of gas production to supply winter fuel and boosting Iran’s presence in international markets, Qalavand said: “In the winter of last calendar year, for the first time, maximum production from the South Pars field reached 705 mcm/d, and now with the cooperation of Russian companies, especially Gazprom, and the use of their latest technologies in this field, maximum recovery is possible.”

He said that CEO of NIOC Mohsen Khojasteh-Mehr had insisted on following up on the MOU contents so that an agreement would be signed after NIOC’s greenlight to Gazprom’s technical and economic proposal.

Russia, Gas Friend and Oil Rival

It seems that the cooperation between Iran and Russia based on this memorandum will come to fruition sooner in the gas sector. Khojasteh-Mehr had recently said: “There is great potential for swapping and transiting Russian gas through Iran, which can be defined as a win-win game for the parties.”

Development of Iran’s gas fields by Russia will be implemented based on the principle of “constructive interaction instead of inhibiting competition”, while it should be noted that there is no competition between the two countries in Iran’s regional markets. Once strategic relations are established between two countries, constructive cooperation will be applied rather than inhibiting competition even in joint markets.

Economic Cooperation

In any case, it is crystal clear that expansion of cooperation between Iran and Russia in the energy sector is one of the issues strongly stressed by the officials of the two countries. Based on this recently, First Vice President Mohammad Mokhber, on the sidelines of the 2ndCaspian Economic Conference held in Moscow, in a meeting with the governors and heads of regions of the Russian Federation, assessed the existing capacities in these regions as useful and constructive in order to improve the level of cooperation.

According to him, the presidents of Iran and Russia intend to maximize the level of economic ties between the two countries.

Knowledge-Based Companies

Promoting cooperation in the field of oil and gas by utilizing the capacity of knowledge-based companies is another important issue that the two countries always emphasize in their relations. Accordingly, on the sidelines of the Caspian Economic Conference in Moscow, Iranian oil industry officials held useful meetings in this regard with top Russian companies, including Gazpromneft and Zarubzhneft. According to Assadzadeh, two Russian technology parks were visited. He continued as saying that these technology parks consist of knowledge-based companies with advanced technology in the field of Russian oil and gas industries, in this visit, a corner of the capabilities of these companies was observed. The issue of technology is one of the axes that, if seriously addressed, will deepen the strategic ties of the two countries.

He said: “In the panel discussion held on energy projects of Caspian Sea littoral states on the sidelines of the Caspian Economic Conference, on behalf of Islamic Republic of Iran, we proposed two categories of infrastructure and case issues to be included in the agenda of the meeting and should be continuously followed up. The attendees welcomed our proposals.”

Development of oil and gas fields in the Caspian Sea, establishment of transportation corridors and energy connections between the countries bordering the Caspian Sea, and establishment of Caspian Joint Investment Fund in order to develop energy projects were among the proposals presented in the meeting.

Assadzadeh also referred to Minister Owji’s presence in Mokhber’s meetings with Russian, Kazakh and Azeri prime ministers, saying: “The statements by Russian companies’ directors indicate very high potential for cooperation between the two nations in various sectors of the petroleum industry. Benefiting from these opportunities require seriousness on the part of both parties.”

Courtesy of Iran Petroleum