Tuesday, April 22, 2008

Oman completes Iranian gas deal

Well, it looks like the chaps have finally signed a real deal on Iranian gas, something few countries have been able to do lately. Now, I know it's not often the Dragon says this (and possibly I make the mistake of focusing on the bad stuff too heavily), but it looks like HM's Government have done something pretty good this time. I was afraid for a moment – after reading the article today in the totally useless Times of Oman – that there was just yet another Memorandum of Understanding. But, according to The Tehran Times they also signed a commitment deal to actually jointly develop Kish.
Iran, Oman ink $7b gas deal
Tehran Times Political Desk
TEHRAN, Apr. 21 (MNA) – Iran and Oman on Monday signed a $7 billion joint investment agreement on development and exploitation of the Kish gas field in southern Iran.
“The document which was inked on joint investment for development and exploitation of (Kish) gas field is valued at $7 billion which can increase to $12 billion,” First Vice President Parviz Davudi told reporters in a press conference with Deputy Prime Minister of the Sultanate of Oman Fahd bin Mahmud al-Said.

Earlier in a meeting, Iranian and Omani officials signed memoranda of understanding on cooperation in tourism and gas export. The two countries’ foreign ministers also signed an agreement on Iran-Oman strategic cooperation.
The key question now is what the pricing structure will be, and volume.

The Kish field is big, with Iranian NIOC reports of in-place gas of around 50Tcf and recoverable gas of 36Tcf. The daily production volume I'd expect to be around the typical Iranian standard gas development phase which is around 2bcf/d, with half going to Iran and half to Oman. [for comparison, that would mean Oman would get around half Oman's total demand right now, and 5 times what they are getting from Qatar via Dolphin]. That would leave enough gas for a Kish Phase 2, possibly with someone else (like India and PetroPars perhaps?)

But at what price has Oman secured the gas? That was always the issue with Iran in previous negotiations, also in the Iranian's negotiations with India and Pakistan. To some extent, if the deal is well structured on investment recovery it almost doesn't matter. Oman needs the gas. Anything less than $5 per Mscf would be outstanding (and unlikely). It also depends on the condensate deal too. I'd love to read the contract...

But, carping aside, a signed gas deal is cause for celebration. We can worry about getting it done and the price to be paid later...

Other links
Kish Gas Field
general Iran gas news


  1. Good news for Oman eh? I guess it all falls into place now as to why Cheney and friends visited recently. Strange that. I note that McDermott’s is owned by Halliburton. Seems there's always a work-around on these things. It’s just as when the US (Brown and Root, London) was building the mega-huge 'Man Made River' project in Libya whilst they pretended to have a full-on embargo etc., etc., against. In the end its all just business with the US, and of course they'll shag anyone for a bucket of oil or a can of gas - just don't let the folks back home now about the new Iranian bedmate! And remember, we gotta keep that terrorist flag a-flying!!! Its no wonder no one likes 'em. They have no shame what-so-ever. On, On! Willie Dryer

  2. Interesting read....

    I feel that the price will be the kicker though. I also wonder if there will be any backlash against this deal from Uncle Sam. Perhaps reduced commitment to buy oil?

    Now just to re-value the OMR against the $....... it might happen, you never know.


  3. Willie, business is business, always has been. But I agree, thats probably one reason Cheney was here.
    Lurker, at the present, the price almost doesn't matter - the deal, if its for around a quarter of the recoverable volumes in the field (eg a half share of half the field) that would be around 9 TCF, adding around 20% to Oman's effective recoverable reserves, and could be used for oil recovery projects economic at big prices (as long as oil price stays high). Getting the volumes was the most important thing.

  4. This comment has been removed by a blog administrator.


If you wish to post anonymously, please pick a nickname by selecting the Name/URL option, or at least sign off your comment with one! I will delete comments I find objectionable or needlessly inflammatory. Sorry for the word verification.... OMG the spam has gotten BAD these past 12 months... trying to avoid making one log in...