• 5 hours Russia Approves Profit-Based Oil Tax For 2019
  • 9 hours French Strike Disrupts Exxon And Total’s Oil Product Shipments
  • 11 hours Kurdistan’s Oil Exports Still Below Pre-Conflict Levels
  • 13 hours Oil Production Cuts Taking A Toll On Russia’s Economy
  • 15 hours Aramco In Talks With Chinese Petrochemical Producers
  • 16 hours Federal Judge Grants Go-Ahead On Keystone XL Lawsuit
  • 18 hours Maduro Names Chavez’ Cousin As Citgo Boss
  • 1 day Bidding Action Heats Up In UK’s Continental Shelf
  • 1 day Keystone Pipeline Restart Still Unknown
  • 1 day UK Offers North Sea Oil Producers Tax Relief To Boost Investment
  • 1 day Iraq Wants To Build Gas Pipeline To Kuwait In Blow To Shell
  • 2 days Trader Trafigura Raises Share Of Oil Purchases From State Firms
  • 2 days German Energy Group Uniper Rejects $9B Finnish Takeover Bid
  • 2 days Total Could Lose Big If It Pulls Out Of South Pars Deal
  • 2 days Dakota Watchdog Warns It Could Revoke Keystone XL Approval
  • 2 days Oil Prices Rise After API Reports Major Crude Draw
  • 3 days Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 3 days Gazprom Speaks Out Against OPEC Production Cut Extension
  • 3 days Statoil Looks To Lighter Oil To Boost Profitability
  • 3 days Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 3 days Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 3 days Whitefish Energy Suspends Work In Puerto Rico
  • 3 days U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 3 days Thanksgiving Gas Prices At 3-Year High
  • 3 days Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 3 days South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 4 days Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 4 days Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 4 days Iraq Steps In To Offset Falling Venezuela Oil Production
  • 4 days ConocoPhillips Sets Price Ceiling For New Projects
  • 6 days Shell Oil Trading Head Steps Down After 29 Years
  • 6 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 6 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 7 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 7 days Venezuela Officially In Default
  • 7 days Iran Prepares To Export LNG To Boost Trade Relations
  • 7 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 7 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 7 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 7 days Rosneft Announces Completion Of World’s Longest Well
Alt Text

$40 WTI Is Now More Realistic Than $60

According to one analyst, oil…

Alt Text

EU Aims To Reform World’s Biggest Carbon Market

The European Union is divided…

Andrew Topf

Andrew Topf

With over a decade of journalistic experience working in newspapers, trade publications and as a mining reporter, Andrew Topf is a seasoned business writer. Andrew also…

More Info

Iran Looking To Ramp Up More Than Just Oil Production

Iran Looking To Ramp Up More Than Just Oil Production

As the oil markets remain focused on the re-emergence of Iran as a major oil producer following the recent lifting of sanctions, another oversupply storm is brewing as the Islamic Republic appears keen to start mining its substantial metals reserves.

On January 17 Iran emerged from years of economic isolation as world powers lifted sanctions in return for curbs on its nuclear weapons ambitions. The controversial deal, stickhandled by U.S. President Obama, will free up tens of billions of assets and allow foreign firms to do business with a country once (and still by its enemies) considered an international pariah.

The addition of 500,000 barrels of oil a day could further depress the price of crude oil which is struggling to break through a resistance level in the low-$30s, although there have been rumblings lately that Iran may increase output more gradually than initially thought, in order to prevent adding downward pressure on prices.

Iran relies heavily on petrodollars for its foreign exchange; the drop in oil prices has hit its treasury especially hard, with losses in the billions. That has led President Hassan Rouhani and other members of his government to focus on non-oil exports, including minerals, which up to now have been underutilized. Related: Russia Cries Dyadya (Uncle), Is Saudi Arabia Listening?

According to various sources, including the U.S. and British Geological Surveys, Iran is among the top 15 minerals-rich countries, with over 700 billion tonnes of potential reserves - about 7 percent of the world's total - worth over $700 billion. Among its mostly untapped deposits (less than a tenth of the country has been surveyed) containing 68 types of minerals, the most important are zinc, iron ore, coal, copper, lead, bauxite (aluminum) and uranium. There are an estimated 3,000 mines, which are around 90 percent state-owned. Iran is the fourth-biggest supplier of iron ore to China and has the world's ninth largest reserves of copper at 32.5 million tonnes. The country is also a major Middle Eastern steel producer.

Yet despite its metal riches, mining has up to now contributed less than one percent to Iran's gross domestic product. One of the biggest barriers is technology. Deprived of foreign investment due to sanctions, Iran has not been able to attract specialists in mineral extraction and processing, nor update its equipment. A lot of mining machinery in Iran is decades-old. Limited railway capacity, low volumes at mining facilities, and high interest rates are further brakes on industrial development.

However with the end of sanctions, foreign firms are lining up to capitalize on the potential. In September executives of Kobe Steel Ltd, Japan's fourth-largest steelmaker, and state-run Japan, Oil, Gas and Metals National Corp (JOGMEC) met officials in Tehran to discuss cooperation in mining. The meeting was part of a plan to attract some $29 billion in foreign investment to the sector. Related: Oil Slides As Oil Majors Report Poor Results

Last week, Iranian trade minister Mehdi Karbasian said the country hopes to finalize $5.4 billion in investment plans during President Rohani's visit to Italy. Potential deals include investments in steel production in southern Iran.

While the lifting of sanctions could certainly lead to greater mining potential, in a way it couldn't come at a worse time, with prices for most of the commodities hiding under Iranian soil at multi-year lows. The slump in iron ore prices in particular has killed off a significant amount of export tonnage, especially since so much Iranian ore goes to China, whose growth has slowed. Reuters reported in September that Iran's iron ore exports fell by almost a half during the first eight months of 2015. To compete in the global iron ore market, Iran must be cost-competitive with the two largest and lowest-cost iron producers - Brazil and Australia.

On a volume basis, Iran has a long way to go. According to the International Steel Statistics Bureau, the country exported 22 million tonnes of iron ore in 2014, compared to top shipper Australia at 754 million tonnes.

But does Iran really want or need to compete? According to the Iron Ore Producers and Exporters Association of Iran (IROPEX), Iran's iron ore shipments will likely drop from 15-16 million tonnes in 2015 to under 10 million tonnes by 2017, as it seeks to lift domestic steel output from 16 million tonnes in 2015 to 25 million tonnes in 2025. To reach that goal, Iran would need to bump up its iron ore production from 45 million tonnes in 2014 to 159 million tonnes. With those ambitious goals, will there be enough excess iron ore to export? Related: Managing Risk Through A Downturn

Unless there is an imminent bull market for metals again, which seems improbable given that most commentators consider the China-driven supercycle for commodities to be over, there is unlikely to be a dramatic impact on metals markets from Iran's return to mining. This is especially true given the country's desire to use its production of iron ore for domestic consumption in steelmaking.

On the other hand, the fact that Iran is now considered open for business will definitely pique the interest of foreign mining companies, both major and junior miners, to conduct exploration activities. As more mines are permitted, this could result in more business for mining equipment manufacturers and suppliers. Al-Monitor points out that efforts are being made to cut red tape by streamlining the permitting process into a “single window system” whereby potential investors do not have to go through different government bodies to obtain licenses.

The 2002 Foreign Investment Promotion and Investment Act gives foreigners ownership rights, the opportunity to transfer profits out of the country in foreign currencies and, importantly for international mining companies sensitive to political risk, “guarantees that the government will pay compensation for any investments in projects that are nationalized or expropriated,” according to Al-Monitor.

By Andrew Topf for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News