Bonds Worth $55m to Fund Joint Field With Iraq

Monday, February 8, 2016 - 02:00

Oil Ministry will issue bonds to boost investment in a joint oilfield with Iraq, as Iran presses ahead with plans to raise crude production capacity by 1 million barrels a day within six months.
Oil Pension Fund Investment Company, a subsidiary of the Oil Ministry, is slated to issue around $55 million worth of Salaf bonds next week through the privately-run Sepehr Investment Bank to develop Azar Oilfield, an official at the investment bank told Financial Tribune.
Salaf bonds have already been issued for iron ore, petrochemical and mazut projects, but it will be the first time that bonds are being issued to finance a major project in the upstream sector.
Salaf is a type of Islamic loan and does not need to be tied to any asset. Salaf bonds are used for Shariah-compliant purposes, do not have a negative yield and are not subject to market volatility risk.
Salaf contracts have a minimum and maximum rate of interest and Islamic governments often use Salaf to implement development projects or to make up their budget deficit.
In addition, $800 million have been allocated from the National Development Fund of Iran to start production at Azar Oilfield, the director of the field said in a statement.
“Another $800 million are needed for the project to go on stream despite the current funding,” Keivan Yarahmadi was quoted as saying by Shana.
NDFI, a sovereign wealth fund, was founded in 2011 based on a parliamentary bill to transform oil and gas revenues to productive investment for future generations.
Iran has announced plans to raise crude production capacity to its pre-sanctions level and regain the market share it lost to rival producers such as Saudi Arabia and Iraq.
Exports stood at more than 3 million barrels per day in 2011, but fell to a little more than 1 million bpd after tougher sanctions were imposed in 2012 targeting Tehran's nuclear program.
According to Oil Minister Bijan Namdar Zanganeh, Iran has signed deals to export a total of 300,000 barrels of oil per day to European customers since sanctions against it were officially lifted in January.

30,000 bpd Target
Development of Azar Oilfield has made 67% progress and production is scheduled to start in summer by a minimum of 30,000 barrels of oil per day.
Yarahmadi said of the eight wells to be drilled in the early production phase, two are in the works and are expected for completion by mid-May.
Azar Oilfield, located in Anaran block, holds an estimated 2.5 billion barrels of oil in place and is expected to produce up to 65,000 barrels per day once fully developed.
It is one of the six joint fields with Iraq, along with Dehloran, West Paydar, Naft-Shahr, Azadegan and Yadavaran.
Russian oil giant Gazprom signed a memorandum of understanding with Petroleum Engineering and Development Company for the development of the field in 2009.
However, Iran dropped the company from the project in August 2011, saying the development process was taking too long and that a consortium of Iranian companies will replace Gazprom in the project.
However, implementation of the project was delayed due to budget difficulties and complications in drilling operations.
According to officials, the depth of the oil reservoir and the need to drill in different formations have complicated drilling operations.