One key feature in the latest economic package is the increased rate of return on investment in IPC deals to 20% in foreign currency. Financial facilities are also envisaged for investors.

Amir Moqiseh, director of investment and business at NIOC, told “Iran Petroleum” that currently, the whole process- from the start of talks to the commencement of construction- lasts only 6-7 months. He also said that the framework for agreements in the new package involves a variety of deals from IPC to EPCF, EPDF, and production sharing agreements.

The following is the full text of the interview Moqiseh gave to “Iran Petroleum”:

NIOC introduced about 200 opportunities for investment. Which projects are prioritized?

In presenting investment opportunities, the projects associated directly with enhanced oil and gas recovery are prioritized because the main purpose of NIOC was to attract investment and financing to address local needs. The first series of projects pertains to the development of oil and gas fields under various contract frameworks, projects for increasing production from NIOC-run fields. The second series comprises prioritized projects, more specifically development of oil and gas fields, exploration blocks, flare gas capture, compressor stations, processing facilities, and logistics.

Do the introduced projects and packages focus on financing or equipment supply?

We prefer the agreements to be like an investment package. I mean that prospective investors would be responsible for the construction and operation. Naturally, commodity supply is a key segment of the job, and would-be foreign investors are required to partly use local services and commodities under the “Maximum Use of National Manufacturing and Service Potential and Supporting Iranian Commodity Act”. Therefore, in parallel with sourcing necessary commodities, preparations would be made, and incentives would be offered for facilitating the financing of projects. Attracting foreign investment to implement petroleum industry projects is also of high significance, and NIOC warmly welcomes it.

What advantages and attractiveness do these projects have for foreign investors?

The most attractive package that was presented was a new economic package arranged for upstream oil and gas projects that are subject to high-level decision-making organs. The most important element in this package is the increase in IPC rate of return to above 20% in foreign currency, which is attractive enough when compared with local markets and regional rivals. Furthermore, we have considered tax facilities for these contracts, which are certainly among the advantages of our contracts compared with others. Another issue is that the process of signing agreements has been shortened and facilitated. Based on agreement with state bodies, we consider a 6-7-month time lapse from the adoption of the development plan by investors to the start of construction work. These issues are significant for the private sector as well as domestic and foreign investors, giving them assurances for decision-making. Another important point concerning building confidence with investors is transparency in the introduction of opportunities and throughout talks. Therefore, 200 investment opportunities along with necessary technical and economic information for decision-making by investors, including the type of contracts, full description of services, initial estimate of field deposits, and the amount of investment, were presented to enable would-be investors to choose the best opportunity after making a comparison. 

What mechanism have you worked out in the investment projects for the local private sector to rival foreign investors?

We hope that ongoing negotiations for sanctions lift prove fruitful, because the country is undoubtedly suffering from the sanctions. No matter how much we try to maximize domestic financial resources, the potential and need in this area are so great that the presence of foreign investors in the oil industry is essential, both in terms of technology and financial resources, as well as finance and capital. Therefore, by anticipating the presence of foreign investors, the mechanism of these contracts has been designed in a way that is attractive to them. Another point is that in the current IPC contracts, there are conditions and the possibility of foreign investors joining domestic contractors and investors, and the infrastructure for this has been created. In addition to the fact that we have approved a financing policy for upstream contracts, specifically IPCs, the National Finance Council has approved a financing policy that is in line with the financing of the contracts themselves. This policy helps domestic contractors to have a greater share in the contract when facing foreign investors. For instance, previously, if foreign companies entering Iran had a 90% share due to their higher financial strength, the Iranian side’s share was about 10%. But under the new directive, Iranian companies can apply the new policy to provide financing, and have a higher share in the contract and a higher partnership with foreign parties. Even companies that currently have a contract, in case a foreign investor joins them, it is possible that a higher share will be considered for domestic companies. This will help local companies not to worry about this issue from now on. Also unveiled at the event is the Petroleum Industry Guarantee Fund, which, upon NIOC’s proposal and in partnership with banks and the private sector, will create a platform on which the private sector can rely to finance its projects up to $6 billion. This fund will help a specific sector achieve production goals by accepting oil industry contracts as guarantees.

How will NIOC supervise investors and companies willing to cooperate?

NIOC has been on the path towards maturity when it comes to contracts and the treatment of investors. My predecessors at the NIOC Directorate of Investment and Business made significant efforts to put us in the position where we are today, and we are also making efforts for a better standing. NIOC, the Ministry of Petroleum, and the administration have prepared the necessary legal infrastructure to welcome investors. The infrastructure available in the oil sector today is almost unrivalled. More important than the infrastructure is the mindset of those who intend to be involved in the negotiations and the process of attracting investors. Upon instructions by Mr. Hamid Bovard, CEO of NIOC, 6 negotiating teams have been established so that we can start the work immediately after investors show up. We have also made essential modifications to contracts for the upstream sector and public-private partnerships. Therefore, we are ready to start talks shortly after presenting opportunities and issuing a call for investment in the contracts that do not need negotiations. NIOC is informed of all details step by step.

What types of contracts are envisaged now?

Our upstream contracts follow the IPC model for most fields. We also have EPCF and EPDF contracts. For Caspian Sea fields and one or two joint fields off the Persian Gulf, depending on the capacity enshrined in the 7th National Development Plan, we are ready to negotiate a production sharing agreement (PSA). It is noteworthy that all contract types in the packages are our proposals to investors. Alongside all these interactions, we are even ready to discuss the type of contracts, and we have no restrictions.

Given the necessity of using new technologies, especially in the development and exploration of oil and gas fields, what steps have been taken to introduce new technologies?

We have a package of critical technologies needed by NIOC, including Smart PIG technology, which is one of our essential needs, and the investment opportunity for it was presented at this event. In addition, within the framework of IPC contracts, the proposals submitted must necessarily have a technological aspect, especially in projects submitted by foreign investors. The same package unveiled at the event also includes a provision to encourage investors to use new technologies, stating that if a company can produce more oil and gas with new technologies than foreseen in the contract, it will be subject to incentive payments above the amounts mentioned in the contract. In addition to encouraging domestic and foreign investors to produce more, this encourages them to use new and state-of-the-art technologies.

In conclusion, how do you see the current status of NIOC and its outlook in interacting with domestic and foreign investors?

Although we currently have upstream and ongoing investment contracts, most of which are with Iranian companies, in light of our potential, we can reach a more desirable point. In the Ministry of Petroleum and the Planning and Budget Organization, an approach has taken shape that we cannot manage projects and upstream development alone, and that we need to benefit from the capabilities of the private and non-governmental sectors. Today, NIOC is open to various markets and capabilities for more partnerships so that it can create wealth for future generations through upstream development. With this approach, we hope that a significant opening will be created for the further prosperity of the upstream business. On the other hand, the private and non-governmental sectors should trust and direct their capital towards productive businesses so that, after the overture in international relations, this interaction will boost.