Iran is set to sign a host of deals with international oil companies for onshore exploration and field development, breaking the industry's 20-year ban on foreign involvement on Iranian soil.

Whereas foreign participation in offshore projects has been relatively uncontroversial since Iran initiated its buy-back program in 1998, allowing companies to operate onshore has hitherto been taboo.
The new moves are one of the first tangible signs that Iran has started to change since the landslide victory of reformist candidates in February's parliamentary election.
One of the most significant prizes on offer is the recently discovered Tabnak field, which Iran claims is the world's largest nonassociated onshore sweet gas field. Oil minister Bijan Namdar Zanganeh said the field could be worth about US $16.5 billion, and foreign companies will be invited to bid for its development within the next 12 months.
Drilling operations on the field - found at a cost of US $17 million (IR30 billion) by the National Iranian Oil Exploration Co. - started toward the end of 1999 and reached a depth of 10,975ft (3,345m). With the production capacity of each test well at 50 MMcf/d, the Iranians arrived at the reserves estimate of 15.7 Tcf (445 Bcm) of gas and more than 240 million bbl of condensates. The field's projected production capacity is 1,500 MMcf/d to 2,000 MMcf/d of gas and 24,000 to 32,000 bbl of condensate. The field measures about 26 miles (42km) in length and 3 miles (5km) wide with a gas layer more than 2,461ft (750m) thick.
Zanganeh said plans have been laid for the exploitation of the field for up to 30 years, adding that field developments will be launched after September. The minister said he hoped production would begin in the Iranian year that starts in
March 2002.
Tabnak is in the southwest province of Fars in the region of the Langeh-Kangan-Bushehr Gulf coast road. In addition to Tabnak, two other gas fields in the same region, Vavravi and Shanool, will be put out to international tender this year. The fields are being given priority because their sweet gas does not require the construction of a processing facility, Zanganeh said.
Landmark agreement
As a recent discovery, Tabnak is not included in Iran's buy-back round.
Iran has 16 onshore exploration blocks and 15 field development projects on offer. The blocks are mostly scattered around Iran's periphery, with a few in the central part of the country. Although bidding officially closed more than a year ago, the huge foreign interest in the field projects and the wave of consolidation in the Western oil industry has meant progress on making awards has been slow.
Iran signed the first onshore oil exploration contract with a foreign company with Norway's Norsk Hydro in April. Hydro, 43.8% owned by the Norwegian government, has signed to explore on the Anaran block, near the Iraqi border in western Iran, with rights to negotiate a buy-back agreement if it finds oil. Hydro has declined to reveal the scale of its investment, but it is less than the $20 million-a-year threshold that would trigger US sanctions against the company. Seismic operations will start by the middle of this month, and exploratory drilling will last 4½ years. "It [Anaran] is in an area which is very interesting," a Hydro spokeswoman said.
The agreement is an expansion of cooperation with Iran begun by Norway's former Saga Petroleum, which was taken over by Hydro and Norway's national oil company Statoil in January. Norsk Hydro acquired a $2.5 million exploration study in the Abadan plain when it took over Saga.
Another Norwegian company, Norex, is carrying out the biggest ever seismic survey of Iranian
territorial waters. This 2-year project, started last summer, will see a nonexclusive 2D survey carried out over 38,610sq miles (100,000sq km) in the Persian Gulf and the Gulf of Oman. The renewed Norwegian interest in Iran follows the restoration of full diplomatic relations between the two countries, frozen
in 1993 during the Salman Rushdie affair.
However, Norsk Hydro has lost on the bidding for another onshore field development contract, and Cepsa is set to become the first Spanish company to sign an agreement with Iran under the buy-back program.
Almost 2 years after bids were submitted for the Cheshmeh Khosh field in southwest Iran, the Spanish firm is understood to have beaten Australia's BHP Petroleum. Negotiations on technical and financial issues are in their final stages, a Cepsa spokesman said, adding that the company would probably provide finance.
The project involves improving recovery from the 20-year-old field from 9,000 b/d to 80,000 b/d by injecting 120 MMcf/d (3.4 MMcm/d) a day of gas, mostly from the nearby Qaleh Nar fields.

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