Azernews.Az

By Aynur Karimova

The energy-consuming countries are standing in a queue for entering Iranian market after the removal of Western sanctions on Tehran.

Enjoying huge oil reserves of about 158 billion barrels, Iran has set a priority to develop its oil industry and attract foreign oil companies to the country.

Asmeret Asghedom, an expert at the U.S. Energy Information Administration believes that the oil industry of Iran is attractive both for European and Asian companies.

"There have already been some international companies that have signed deals to invest in Iran’s energy industry and restart their purchases of Iranian oil," she told Azernews. "In late January 2016, after the nuclear deal was signed, Iran signed energy and non-energy deals with companies in France and Italy. For the energy-related deals, Italy’s Saipem signed a Memorandum of Understanding to build a pipeline in Iran and upgrade two refineries (Shiraz Pars and Tabriz), while France’s Total signed a memorandum of understanding to import 200,000 b/d from Iran. Greece’s largest refinery, Hellenic Petroleum, also agreed to buy oil from Iran. South Africa has also said it would resume purchases of Iranian oil."

India and China also rush to the Iranian market, according to the expert.

"India is another country that has shown interest to invest in Iran," she said. “Last year, the Indian company ONGC Videsh submitted development plans to develop the Farzad-B gas field. The plan has not been approved yet. Iran is also continuing to work with China’s Sinopec for the development of the Yadavaran oil field and with CNPC for the development of the North Azadegan oil field."

Touching upon the possibility of investment from the U.S. companies, Asghedom noted that these companies are precluded from investing in Iran’s energy industry "because the U.S. primary sanctions against Iran remain in place."

Free of sanctions, Iran plans to increase its oil export by 500,000 barrels per day (bpd), and then raise the figure by another 500,000 to two million bpd within a six month period at the next step.

Recently, Iran's Oil Minister Bijan Namdar Zanganeh has called for $200 billion of investment for development of oil industry of Iran, the fourth country in the world for its proven oil reserves.

At a time when the market already is grappling with a global supply glut and fluctuating oil prices, Iran is keen to return to the world market with huge steps. In this regard, the country plans to attract foreign companies to the oil industry by introducing new Iran Petroleum Contracts (IPCs).

Asghedom believes that attraction of such volume of investment in Iran's oil industry will depend on several factors.

"This depends on numerous factors, such as when the bidding for the IPCs/projects that are being offered begins and the length of the bidding and approval process," she said. "IOCs [International Oil Companies] will also have to go through a due diligence process when choosing which Iranian local service companies to work with to fulfill Iran’s local content requirements. Because U.S. primary sanctions remain in place, IOCs cannot work with Iranian persons/entities that remain on sanction lists, such as the Islamic Revolutionary Guard Corps (IRGC)."

Asghedom is sure that the current proposed IPC model is more attractive than Iran’s buyback contracts "because the IPC allows IOCs to participate in the project’s production phase and the project’s costs will not be fixed, unlike in the buyback contracts."

However, each IPC will have to be negotiated for each project so the attractiveness and benefits to international oil companies (IOCs) may vary by project, she stated.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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