TEHRAN – The Oil Technology and Innovation Park is revising the financial and operational framework for contracts to revive low-yield oil wells, with increased government support aimed at reducing risks for technology-based companies and improving access to well data.
Mehdi Ahmadkhan-Beigi, head of the Oil Technology and Innovation Park, said the new framework incorporates lessons learned from previous well-revival contracts, including changes to the financial structure, risk-sharing mechanism and access to technical information.
He said 17 contracts had previously been signed with technology-based companies, but about five companies withdrew or had their contracts terminated, while 12 contracts remained active. During implementation, the park invited the companies to identify operational and financial challenges and use their feedback to revise the contracting model.
Ahmadkhan-Beigi said the financial structure of the previous contracts was one of the main obstacles because it was not attractive enough for technology companies, investors or investment funds. The new framework therefore includes changes designed to improve the financial appeal of the projects.
Under the previous model, technology companies carried most of the financial risk. If the first well failed, another well could be assigned to the company, but if the second well also failed, the company would not recover the costs incurred on the first well.
Under the new model, the National Iranian Oil Co. will assume part of the risk. If the first well fails but the second succeeds, the costs incurred on the first well will also be reimbursed to the technology company according to the terms of the contract.
The new framework also removes the previous limit on the number of wells that could be assigned to technology companies, allowing them to work on more wells based on their technical capabilities and capacity.
Ahmadkhan-Beigi said new contracts will follow the revised model, while existing contracts with a reasonable chance of success will be reviewed and may continue with additional support.
With the cooperation of the National Iranian Oil Co., efforts are also underway to increase the involvement of operating companies, including the National Iranian South Oil Co. and the Central Oil Fields Co., to shift part of the financial and operational burden away from technology companies.
He said such support could impose additional costs on the Oil Ministry, but it is intended to reduce risks for technology companies and improve the chances of successful well-revival projects.
Contracts that have expired are also being considered for extension where companies have the necessary technical capabilities and projects have a reasonable prospect of success.
Ahmadkhan-Beigi identified access to technical information as another major obstacle. Under previous contracts, technology companies often faced paperwork and delays when requesting data from operating companies. In some cases, information was provided on compact discs, further delaying access.
The Oil Technology and Innovation Park is developing a system to provide technology companies with required well data online and reduce the time needed to access information.
The Deputy Directorate for Production Supervision is also participating in the process, while coordination with operating companies is underway to accelerate the delivery of data required for well-revival projects.
The revised framework also provides for the participation of oilfield service companies. Ahmadkhan-Beigi said the mechanism would allow larger companies with technology-based subsidiaries to participate in oil-well revival projects.
He said some technology companies involved in previous contracts needed drilling rigs, creating significant costs and making some projects economically difficult without support from the National Iranian Oil Co. and operating companies.
Under the new arrangements, operating companies are expected to provide greater assistance to help remove such implementation barriers.
Ahmadkhan-Beigi said the revised framework seeks to address key problems identified in previous contracts, including the financial model, risk allocation, access to information, limits on the number of wells and cooperation by operating companies, paving the way for more effective oil-well revival projects.