The partnership commitments between Iran and Russia have been piling up this year, with the total tag in excess of USD 40 billion. Most of the deals are in the oil and gas sector although other areas of economy are also included.
The bulk of the deals come from the 16th Joint Commission meeting held in Russia in November this year and the MoU signed between National Iranian Oil Company (NIOC) and Russia’s Gazprom in July 2022.
Based on the reports from the specialised news agency Shana of Iran and the Iran Petroleum, here is the summarized version:
In July, just before the visit of President Putin to Iran, 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.
Iranian petroleum minister Owji, speaking about the deal said that there is the memorandum of understanding worth nearly $4 billion for field development and $40 billion for construction of gas pipelines and LNG plants.
The $40 billion MOU signed between Iran and Russia covers various aspects.
The overall objective is to increase the oil and gas production in Iran. It is also meant to boost pressure in the South Pars gas field, an area of cooperation between Iran and Russia.
Of particular importance in this context is the phase 11 of the South Pars, a shallow-water area of the huge field in the Gulf. Simon Watkins, writing for OilPrice, says, “The first phase of the current development program [of phase 11], according to Iran’s lead developer on the project, Petropars, involves the drilling of 30 wells plus the fabrication and erection of two production platforms, each containing 15 wells, with the aim being to produce 2 billion cubic feet (56.6 mcm/d) of gas per day as well as 80,000 barrels of liquefied natural gas (LNG). This will require construction of additional liquefied natural gas (LNG)-related installations and two 32-inch pipelines, totalling 270 kilometres (km) in length. The second phase of the development program will address the likely fall in pressure during the first three years of full production, with the graduated installation of the pressure equipment related to different enhanced gas recovery techniques.
Total of France was 50.1% partner in the phase 11 but withdrew under the heavy pressure of sanctions. The CNPC automatically took its place but also withdrew later.
The USD 40 billion MoU, among other things, covers the full assistance of Gazprom to the NIOC to the extent of USD 10 billion for the development of the Kish and North Pars gas fields with a view to the two fields producing more than 10 mcm/d. The MoU also pledged a US$15 billion project to increase pressure in the supergiant South Pars gas field on the maritime border between Iran and Qatar. Gazprom will additionally be involved in the completion of various liquefied natural gas (LNG) projects and the construction of gas export pipelines.
These projects could possibly give some control to Russia over the gas supplies from Iran, both in the piped and the LNG form.
The European price cap is understood to play some part in the gas sector cooperation between Iran and Russia.
Within this USD 40 billion package, there are the plans to spend USD 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.
Ahmad Assadzadeh, deputy minister of petroleum for international affairs and trading of Iran 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, Iran may start these plants and export LNG.
Assadzadeh, whose remarks quoted above are taken from the Shana report, 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.”
The head of NIOC, Mohsin Khojasteh-Mehr 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.”
He said that the 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.
Some documents signed between Iran and Russia during the 16th Joint Commission meeting held in early November in the Grozny city of Russia, step outside the oil and gas sector.
The strategic document for the development of bilateral relations between the Islamic Republic of Iran and the Russian Federation was signed on Tuesday by Iranian Minister of Petroleum JavadOwji, as the head of the Iranian delegation of the Joint Economic Commission of Iran and Russia, and Alexander Novak, the Deputy Prime Minister of Russia.
A loan agreement for the electrification of the InchehBorun -Garmsar railway project was also signed between Ali Fakhri, Deputy Minister of Economy and Finance and General Director of Iran’s Investment and Economic and Technical Assistance Organization, and Vladimir Ilyichev, Deputy Minister of Economy of Russia.
In addition, a bilateral memorandum of cooperation in the field of health was signed between Mohammad Hossein Niknam, Director General of International Cooperation of the Ministry of Health, Medicine and Medical Education of Iran, and Sergey Glagolev, Deputy Minister of Health of the Russian Federation.
Also, Mohammad Ziyar, the CEO of Sina Energy Gostar Holding, from Iran and Mikhail Silantiev, the CEO of the state-owned Promsyrieimport Company of Russia, also signed a memorandum of understanding for the implementation of EPC projects for product transfer pipelines.
Iranian petroleum minister Owji said that Iran already has more than 4 billion dollars in contracts with Russian majors for the development of oil and gas fields. He added: “Parallel with these contracts, there are more than $40 billion of memorandum of understanding with major Russian companies in various fields such as construction of gas export pipelines to neighboring countries, swaps of oil, gas, oil products and export of petrochemicals.” He was speaking to the media at the end of the joint commission meeting.
The talks at the joint commission also covered the petrochemical sector.
The Russian deputy prime minister Novak, who is the co-chair of the joint commission, said that both the countries support a joint comprehensive program in the fields of oil and gas, refining and petrochemicals, as well as a roadmap for technical and strategic cooperation.
Novak said that the interaction, broad in nature, would be materialized through the joint working group to develop and implement projects. /// nCa, 8 December 2022