The Iranian E&Ps: the road to maturity

Dr. Mohammad Ali Emadi,
Deputy in Upstream Development
Pasargad Energy Development Company

How far are E&P companies from where they must be and how must this distance be covered in short- and long-term programs?
Based on the needs of our country, a paradigm shift has been started for several reasons. One of these reasons is the changes in production conditions of oil fields and the necessity of employing new technologies and management skills. Optimization and management of price reductions are of utmost importance, particularly after the decline in oil prices. On the other hand, our mega fields are in a stage where they cannot produce oil by conventional methods. Following the state laws emphasizing the maximization of privatization and the necessity of paying considerable attention to the incentives of the private sector, the issue of resilient economy, strengthening domestic capability, and using domestic resources, it will be meaningful to establish local E&P companies. In the upstream field, of the most important sections are the investment and employment of capital, technological capabilities, and technical management skills. Currently, due to some factors, there are only 11 eligible local E&P companies. However, these factors are the minimum required level, meaning that these companies are not necessarily in good conditions. They have to reach a specific level to continue their operation at the next stages; otherwise, based on the assessment levels of the Ministry of Petroleum, some of these companies may be removed from the E&P list. These companies should strengthen themselves by meeting the conditions set by the Ministry of Petroleum. These conditions include partnering up with qualified international companies, fund raising, utilizing technology, and meeting the objectives of the field development projects. Therefore, companies must reach maturity in skills such as commercialization, technical affairs, and legal issues. Each company in the list of 11 is strong in some domains. They are strong in financial, technical or legal domain, while some are at a weaker level in all three cases. In addition, an E&P company is a company that can perfectly handle risk management. This is a strange concept in our country. E&P has a complex, knowledge-based framework. Distinctive bench marking must be studied for a road to maturity. This is not what the companies can do alone. NIOC must have an active role in directing and supporting these companies. In the future development of our hydrocarbon reservoirs, these elements should form well from the very beginning, and appropriate templates should be designed for them. Empowering companies is one of the most important issues.
Another part is the regulatory which the NIOC should shape (e.g. HSE field). In this portfolio, we have a variety of items that must ultimately cover the future needs of the oil industry in all sectors. Moreover, these items must convince the country that these companies have the necessary standards and skills to cooperate with foreign companies. This volume of work requires a lot of skilful work, and knowledgeable and eligible groups can assist us in reaching our goals.
What do you think of cooperation with foreign countries? Can they play a significant role in management and investment?
International companies play a key role in promoting local companies from the starting point to the secondary point. Foreign companies should evaluate and recognize the status of domestic partners concerning the above-mentioned four features. In analysing the distance between the status quo and the ideal situation, one of the most important issues is the provision of finance and technology as well as financial, credit, capital, and management skills. Perhaps the most important part is the financial resources on which the threats of international conditions and tax laws have a great impact. The stability of financial resources is the most important factor which can assist us in achieving success provided that the problems related to these resources are solved. In my opinion, other sections have fewer serious issues. The most important issue is the transfer of money and its transparency.
Which field development project has a greater chance of operation?
The E&P companies are the young players in this domain. Different fields have been defined for this section. The three best fields are the South Pars, Azadegan, and Yadavaran, but none of the confirmed companies are eligible for these three fields. Even the biggest company, Petropars, which is determined along with Total for Phase 11 of South Pars, must strengthen itself. Otherwise, it may continue its operation as a silent party. The large fields are attractive, but they can respectively damage or ruin the companies. The management of these 120-kg weights requires a person having lifted at least 60 kg. We have been strong in entering high-risk issues. However, this domain necessitates high power and numerous international experiences. Perhaps small fields are the best option as a start. Anyone who wants to reach the twelfth grade must pass lower grades one by one. Large fields need very large financial resources, and none of our companies have the ability to finance them.
I hope that the large fields will be our first fields for development and production. It is extremely important to take necessary steps in order to enter into big contracts. The large fields must be the first sections where the contracts are made. At the same time, small fields can be presented for small companies.
And the last words?
This is a golden stage for our oil and gas industry,where a paradigm shift occurs. With respect to the international conditions and the price of oil and gas, if this paradigm shift does not occur, we will certainly encounter serious problems.