Bringing Excellence and Experience to Oil & Gas: MAPNA ventures into E&P

Bringing Excellence and Experience to Oil & Gas: MAPNA ventures into E&P




Since 2007, oil and gas has been one of the main business lines of MAPNA Group. The oil & gas division of MAPNA holds four subsidiaries, i.e. Oil & Gas Development Company (OGDC), MAPNA Drilling Company (MDCO), Tehran Energy Consultants (TEC), and Neyr Perse Company (NYP). These companies have been delivering products and services for onshore & offshore drilling services, refineries, petrochemical utilities, and gas compressor stations for years. But since 2016, MAPNA has decided to move to a new level, and engage in exploration and production (E&P) business.
E&P in Iran
Article 12 of Iran’s Sixth Development Plan calls the government to “support establishment of non-governmental organizations in order to invest in exploration (but not ownership), production and development activities in oil & gas fields, especially shared fields”.
Opening the space up for domestic E&P companies is in line with the privatization campaign that the state has followed since the early 2000s. The decision to encourage establishment of E&P companies is governed by several factors: to transfer advanced technology, to upgrade domestic technology employed in upstream operations, and to empower Iranian companies, who more than a century after the discovery of oil in Iran have not yet entered the E&P business.
In November 2015, the Ministry of Petroleum released a document setting forth procedures and criteria for Iranian companies applying to be serve as qualified partners in exploration, development, and production in oil & gas fields. Along with this guideline, the new Iran Petroleum Contracts model was also ratified in August 2016, paving the way for increased foreign investment in Iran’s energy industry and to provide further opportunities for Iranian companies to participate in procurement of equipment and commodities, and execution of offshore and onshore drilling operations in partnership with international companies.
Thirty-seven companies bid for qualification as an E&P company when it was first announced by the Ministry of Petroleum. After a complicated vetting procedure that took several months, eight companies, including MAPNA, were acknowledged as qualified E&P companies. By August 2017, more companies were added to the list of qualified E&P companies and the number now stands at seventeen, though the companies vary significantly in terms of their financial and technological capabilities.
Ratified by Majles, Iran’s parliament, in 2012, the Amendment on Oil Act defines upstream activities as “studies, activities, and measures in respect to exploration, drilling, exploitation, operation, conservation, transportation, reservation, and exportation of oil resources such as prospecting, survey, geology, geophysics, geochemistry; drilling and technical services for wells; gas, water, air injection and other operations carried out to optimize the recovery rate.” The act also lists as part of upstream activities “establishment and development of related facilities and industries, delimitation, preservation and protection [of oil fields] for primary separation, exportation, utilization and delivery for downstream operation.”
Thirty-seven

By definition, E&P companies are those companies which carry out high-risk/high-reward integrated exploration, development, and production operations in oil & gas. E&P companies should fulfill a number of qualifications to be designated as such. These include:

  1. Technological capabilities: geology and geophysics, reservoir engineering, sedimentary basin modeling, reservoir evaluation, basic engineering and front-end engineering design, drilling engineering, surface facilities, launch, IOR/EOR techniques, asset management and optimization, well repair
  2. Management capabilities: multidisciplinary management, risk management and analysis, outsourcing, operational planning and HSE
  3. Financial and legal capabilities: financing technics, legal and contract negotiations
  4. Technological management capabilities: technological need assessment for the oil fields, project statement and outsourcing.

Iranian companies which have been acknowledged as qualified E&P companies will serve as contractors for National Iranian Oil Company and will be handed projects after tenders are held by NIOC. They will not engage in EPC, EPD, manufacturing, or delivery of services such as drilling. Rather, they will be responsible for investment, financing, development and management of exploration operations, reservoir engineering, master plan development (MDP) for reservoirs, annual delivery program (ADP), project management, development of oil & gas fields, and operation of upstream facilities, all of which are activities focusing on management of capital, risk, expenditure, liquidity, and multidisciplinary management, to create revenue for the stakeholders.
A category of Oil Service Companies (OSCs) has been also defined by Iran’s Ministry of Petroleum to include companies that deliver services such as drilling in upstream activities, plus EPC companies. OSCs are supposed to participate in competitive tenders and will sign contracts with National Iranian Oil Company as their client upon success. They can offer services and commodities to E&P companies afterwards, which ensures added value in capital and expenditure management process for the companies.

Diagram below illustrates a typology of companies involved in the oil industry:ep-1-(2).jpg
E&P companies will develop the designated oil fields in three stages, i.e. evaluation, discovery, and production and operation.
Discovery
Searching for new blood into the veins of E&P companies, the discovery phase includes identification of untouched reservoirs for development, and catering to increasing energy demands. Advanced technologies are used for exploration, geological, geophysical, and geochemical analyses to assess the volume of reservoirs.
Evaluation
In the evaluation phase, the company studies how to produce oil from a newly-discovered field. The evaluation phase usually includes the following steps:
  1. To the determine the best location to drill a delineation well,
  2. To conduct various tests in order to assess the state of the oil reservoir,
  3. Estimation of the oil/gas in place,
  4. Estimation of exploitable oil/gas.
Development
E&P is a capital-intensive business. A significant volume of money is needed to carry out drilling operation and technical services, and to set up platforms and other facilities to ensure maximum, efficient production of oil from the field. E&P companies need to:
  • Decide on investment;
  • Draw up a number of development scenarios, assess the budget of each, and select the optimal scenario;
  • Launch drilling operation;
  • Determine the scope of operation on the platform and at the sub-basin (for offshore fields),
  • Launch construction of facilities,
  • Launch front-end engineering operation, continued with detailed engineering and construction,
  • Manage companies involved in the project, and data on design and construction of the facilities.
Production and Operation
Return of investment (ROI) takes place at this phase. The key objectives are to keep the flow of production at the maximum level and run seamless monitoring to ensure optimal expenditure, oil production, refinery and processing of oil, and its transportation to the next stage of the value chain.