Iran Press: Production at Nowruz Oil Field Halted

Text of report: “Due to technical difficulties, production of oil at Nowruz field is halted”, published by the Iranian newspaper Iran on 27 August

The managing-director of the Iranian Continental Shelf Oil Company has said: The production of around 90,000 barrels of oil per day at the Nowruz oil field has been brought to a halt because of certain technical difficulties.

Speaking in an interview with the Fars News Agency, Mehdi Hasani explained the reasons for the halt in the Shell company’s oil production in the Nowruz field, and also the reason for the non- inclusion of provisions in the contract stipulating penalties for late completion. He said: As a rule, no delay penalty clause is included in the buy-back contracts, and this is because the foreign company involved is investing in the project itself, and as such, the matter has nothing to do with the Continental Shelf Oil Company.

Explaining the reasons for choosing the Shell company for this contract, Hasani said: The company was chosen because of its extensive experience and knowledge of oil reserves across the world. At the same time, the rate offered by the Shell company to explore the Nowruz fields was very low, and the entire cost will be even less than 100,000 dollars.

Commenting on the reasons for the decision not to include a late completion penalty clause in the contract, Mehdi Hasani said: All projects, even the domestic ones, may experience delays from time to time. Furthermore, all projects have a provisional completion deadline, and at that time, the problems of the project are reviewed carefully and these are then conveyed to the company involved in the contract, which in turn takes steps to address and resolve them out of its own budget. Hasani went on to say: If for any reason the declared problems in the oil fields remain unresolved by the time the provisional completion deadline expires, we are not going to accept final and official completion of the project by the Shell company.

In another part of his remarks, Hasani denied certain reports suggesting that the final delivery of the Sorush and Nowruz oil fields will take place on 5 Shahrivar [27 August 2005], and said: I think it is going to be very unlikely for us to be able to complete the final and official delivery of these two oil fields by that date.

Commenting on the heaviness of the oil extracted from the Sorush and Nowruz fields, and the problems that this quality may cause for further processing and refinement, the managing – director of the Iranian Continental Shelf Oil Company said: The quality of the oil produced by every field – including the Sorush and Nowruz fields – is a God given quality and we cannot change its API [abbreviation in English] in any way. Of course, at the present time, when the oil prices are very high in the international markets, the sale of even heavy crude oil with a high API is economically viable.

Furthermore, Hasani explained: At the present juncture, the price for a barrel of crude oil produced by the Sorush field is around 40 dollars, even though the original price projected for the Sorush field’s oil in the contract signed [with the Shell company] was estimated to be around 15 dollars per barrel.