On March 18, 2005, a much-sought-after contract to develop the giant Bangestan field was awarded to Petro Iran Development Co., after having been delayed several times since 2001. Bangestan contains an estimated 6 billion barrels of Oil reserves and produces about 250,000 bbl/d of oil, but the field is one of the oldest in the country, requiring investment and technological applications to compensate for natural decline. In April 2003, Shell stated that it was frustrated with the slow pace of negotiations on Bangestan, including numerous changes to terms of the project. Total and BP then bid on the project, which is now reported likely to be awarded to a local firm (PetroIran) instead. Development of Bangestan could cost $3 billion over 10 years, and aims to raise output to 600,000 bbl/d.

In May 2002, Iran's Oil Ministry signed a $585 million buyback contract with NIOC subsidiary PetroIran to develop the Foroozan and Esfandiar offshore oilfields. PetroIran is expected to increase production at the fields to 105,000 bbl/d by late 2005. The two oilfields straddle the border with Saudi Arabia's offshore Lulu and Marjan fields.

In other news related to buyback deals, the Cheshmeh-Khosh field, which previously had been awarded to Spain's Cepsa for $300 million, was re-awarded in January 2004 to state-owned Central Iranian Oil Fields Company (CIOFC). In December 2003, Cepsa and OMV withdrew from lengthy negotiations after a reported failure to agree on development costs and buyback terms. It remains possible, however, that Cepsa and OMV could still be involved at Cheshmeh-Khosh in some way. The objective is to raise crude production at the field from 40,000 bbl/d currently to 80,000 bbl/d within four years.

Recently, Iran appears to have had some second thoughts about buybacks (including charges of corruption, insufficient benefits to Iran, and also worries that buybacks are attracting too little investment), and reportedly is considering substantial changes in the system. In late May 2002, Canada's Sheer Energy became the first foreign company since Eni's Darkhovin deal to reach agreement -- $80 million to develop the Masjed-I-Suleyman, or MIS, field. Sheer's goal was to boost MIS production from 4,500 bbl/d to 20,000 bbl/d (the historic field, discovered in 1908, peaked at 130,000 bbl/d in the 1930s), but the company was replaced by China's CNPC, which bought the subsidiary of Sheer working on MIS. CNPC began work on the field in June 2005.

Source: Energy Information Administration