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Iran Proving To Be Its Own Worst Enemy For Oil Development

Rouhani Barkindo

Despite Iran’s efforts to re-enter the oil market, and amid promises two years ago by the country to open up the industry to foreign market after the sanctions against it were lifted, investors are still having difficulty making any real headway in the country.

Oil majors from around the globe have been to Iran to meet with local officials regarding upcoming tenders. Despite that, several representatives and their negotiating teams have said that they were still in the dark about the geology of the oil fields in Iran, and even on the terms of the contracts. They also did not know who their local partners would be, and how soon they would begin to recoup their investments in the Iranian fields.

Contract terms are important since investors do not want terms that could cause them to violate any remaining sanctions. Bob Dudley, the Chief Executive of BP commented, “Iran is a large oil and gas province ... but we don't have any specific contracts right now. "We're going to have to be very careful. We don't want to violate any sanction."

Another issue that has hampered progress for companies that wish to do business in Iran is that of political infighting. Opponents of President Hassan Rouhani are opposed to foreign companies controlling oilfields on the grounds that such a move contradicts the Iranian constitution. The government in turn is accusing its opponents of stifling the nation’s recovery. Presidential elections are set for May, and Rouhani faces escalating opposition from followers of Ayatollah Ali Khamenei and the Revolutionary Guards.

Along with opposition, tension between the two sides is also on the upswing.

Yet another issue is the fact that the management at the National Iranian Oil Company has been reshuffled several times this year. Foreign companies have discovered that the team with which they have been working has been changed, and the moves have also resulted in contract delays.

Lincoln Brown for Oilprice.com

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  • Mata Bakhtiar on October 21 2016 said:
    Dear Mr. Bob Dudley,
    It is unfortunate, millions of Iranians feel sadden but not at all, surprised of your statement.That the still, unreformed British Petroleum, rather hoping or it still feels the post sanctions-Iran, the "rich province" is another gravy train: [Another] day in the office; be it in Nigeria, or one of those Arab statelets.

    Sir, in all probabilities, in case your calculations are based on the lingering sanctions and the Iranians desperate need for Western technology and investments. The reality is however that, [None] of the above are in themselves strong-enough a factor to coerce the government in Tehran into offering a gravy train to the BP or any Western oil majors. It simply wont happen!
  • Saeed on October 22 2016 said:
    "Yet another issue is the fact that the management at the National Iranian Oil Company has been reshuffled several times this year"
    Don't think this is true. It has changed only once in the past several years.
  • Babak Khurramdin on October 22 2016 said:
    Whilst I agree that the best and most suitable option for Iran to import technology is through western oil companies, such as Shell, Eni etc, I think we ought to tread carefully with certain companies, namely: Total and BP - given their past records. That is not to say we should turn down BP and Total and simply ignore them - no absolutely not. We should, however, be wary and mindful of the fact that sanctions (for whatever reasons) may be reimposed. In that situation, if the terms of the contracts are written in an overly favourable way, just to satisfy their minimalist positions as a precondition of transferring technology, we are bound to repeat the same mistakes of the past. History has proven that the nature of engaging with western companies, in the best case scenario, has only served our short-term goals. I would like our negotiators and officials to be extremely cautious and spend as much time as possible formulating contracts that predict as many eventualities as it would be possible to anticipate, in order to mitigate any potential adverse effects of the contract on Iran. When our negotiators are considering to offer any contracts to these companies, they should have the experience of Peugeot and Total in mind. Regardless of how desperate we might be for technological know-how in upstream and downstream, we will not auction our sovereignty. We should be even more cautious when dealing with Russian and the Chinese, especially Russia. They should never, under any circumstance, be trusted. The problem with the Chinese is that they have an inferior technology, and even in the fields that they are competitive, they bring their own workforce with them. So that is simply something that is not going to work for Iran. I would say the best companies for Iran to develop long-term strategic partnerships with, in order to utilise our potentials, is with the Americans, i.e. Exxon etc. But obviously due to congress and their ability to politicise every minor transaction with Iran, and worse, steal our money, that is not going to be an option for Iran. Shell might, and I emphasise on the word: might - be a viable option to explore. Regardless of which company we deal with, any contract must be long term and with Iranian partners that will receive 100% technology transfer. Do not rush. Please be very cautious, and again, do not rush. Ignore media pressure. We should do what is in the long-term interest of Iran only. Not party politics. Iran will prevail, as always.

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