IPC Details Needed to Be Outlined
Wintershall Holding GmbH is Germany's largest crude oil and natural gas producer. A wholly owned subsidiary of BASF, it posted a net profit of 2.4 billion euros in 2011.
Wintershall has started talks with a view to investing in Iran's energy sector as the country is opening up thanks to the removal of sanctions.
“Iran Petroleum” has conducted an interview with Martin Bachmann, who heads
Exploration and Production at Wintershall AG since March 2010. He has experience in projects in the Middle East and North African countries.
Q: Mr. Backmann! What do you think of investment in Iran's oil and gas sector under the present circumstances?
A: From what I have heard from the BP man and also from Chinese representatives, this is a difficult time for oil industry right now. The oil price is very low. So investing is hard and we are thinking very carefully before investing. So we are thinking very carefully what's the best place to invest and whether it's good for us or not. Maybe 5 years ago when the oil prices were very high people we would rush to do so but now is different. They are a little bit careful and want to be sure.
I think IPC (new format of Iran's oil contracts) is fine. It’s a great start, but we should know all the details of a specific project also.
Q: Have you reviewed the IPC text?
A: No. The real important thing is the details. And that will of course take time to evaluate. The two sides need to talk to each other and find out what's possible and what's not. IPC is a framework. It's good that government has done that. But it’s not easy to find investment for oil as it was five years ago.
Q: What do you think of Iranian oil and gas companies and collaboration with them? Have you seen any opportunity to that effect?
A: I think there is always an opportunity when you bring professionals together. And Iran has been in the oil industry from the start. It's not new to that field. When you go to countries like this you meet a lot of people with great experiences so that create an opportunity which makes it easier to talk to each other. But I think there is long time that foreign companies couldn’t come to Iran. So we need some time to know each other and talk and understand each other.
Q: An important element in the IPC text is the duration of contracts for 20 years along with special privileges. Can this tempt foreign companies to invest in Iran?
A: Let's face it that 20 years is not long time in the oil industry. Our projects normally got much longer than that. For which reason we make contracts for 40 years. This is something we need to talk about.
Q: Which elements in a contract can attract foreign companies to Iran?
A: In the end it depends on the project. Some projects can easily be done in 20 years. I think there should be a mechanism to make the contracts' length adapt to a specific project. If it’s a long-term project which takes a long time to generate profit, it should be reflected in the contract.
Q: According to remarks by the BP vice president in a recent conference in Tehran, enhanced recovery and field exploration are attractive for foreign companies. Is that attractive to your company, too?
A: I think both are attractive. The easiest oil is the one which is there. You just need to get more out of reservoir. But there is so much oil that has been found in the past and has not been developed. So investing in these fields is attractive as well. I think NIOC knows that too and is focusing on that two areas in parallel.
Q: What do you think of Iran's gas industry?
A: I have said the oil market is difficult right now but the gas market is even more difficult. Because the international market is over supplied. The gas is a more long time business than oil. I think Iran should tackle the challenge of internal demands and also international one. In the end you should consider that: Can you be competitive in the gas global market? At the present time it’s difficult. But on the other hand if you look at South Pars, it’s the biggest gas field in the world and there is huge potential for that to export.
Q: What will happen to the oil market?
A: We all agree that the oil market should be stabilized. In the long term, 50 dollars per barrel is not enough to make investment to be made to guarantee future supplies. As I said we are in a long-term business. We need to invest now to produce oil four or five years later. So I think we should get to a place where the oil price is stabilized and then we can invest for future or otherwise we will have a problem.
Q: Is Wintershall operating any project in the Middle East?
A: We have a project in the Emirates. Also we are looking to other projects in this region. We are quite active in Libya and North Africa. We had long projects in these countries. We want to make a long and deep relationship with our partners. We have a great record. We always try to separate politics from the economy.