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Iran Strikes Second Oilfield Development Deal Since Nuclear Pact

Oil

A consortium of Russian and Iranian companies signed an agreement with Tehran to develop two oilfields located on the country’s border with Iraq, according to emerging reports—Iran’s second deal since the nuclear pact.

The project, which will develop the Aban and West Paidar fields, will cost $740 million and will produce roughly 105 million barrels of oil over a ten-year period.

Russia’s state-run Zarubeznheft Oil Co. and Iran’s Dana Energy are the contract’s private signatories. Since the 2015 nuclear deal that reintroduced Iran to global oil markets, this is only the second international development deal that has reached fruition. Last year, the country signed a $5 billion agreement with France's Total SA and a Chinese oil company to develop a sizeable offshore natural gas field.

During President Barack Obama’s term, Iranian officials had been vocal about their disappointment with the U.S. government’s lack of diplomatic assurance to global partners about the longevity and permanence of the nuclear deal. Senior officials said that major oil and gas firms were hesitant to sign development deals with Iran because of the uncertainty of state department policies.

Since President Donald Trump’s inauguration, he has threatened on multiple occasions to scrap the deal entirely. Trump has begrudgingly waived sanctions on Iran multiple times so far, as he is required to do every few months as a way of recertifying the nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA). However, when he waived the sanctions in January, he said it would be the last time he did so unless the nuclear deal was somehow fixed, although how specifically that was supposed to be accomplished was unclear. If the president trashes the nuclear deal, Iran will likely restart its nuclear program, as it has already stated.

By Zainab Calcuttawala for Oilprice.com

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  • Mamdouh G Salameh on March 15 2018 said:
    Iran sits on the 4th largest proven reserves of oil amounting to 158.4 billion barrels (bb) and the world’s largest proven natural gas reserves amounting to 33.5 trillion cubic metres (tcm) equivalent to 1183 trillion cubic feet (tcf).

    While Iran exports an estimated 1.7-1.8 million barrels a day (mbd), its net natural gas exports amount to only 1.6 billion cubic metres (bcm) annually, just a miniscule volume of what it can export were it to attract foreign investment.

    Iran’s oil and gas industry needs more than $200 bn to develop its massive natural gas reserves and also to repair the seriously damaged oil reservoirs in its oilfields from the days of the Shah.

    And despite great expectations of foreign investments in the aftermath of the signing of the nuclear deal in 2015, Iran has only managed to sign two deals with foreign companies: one with French oil giant Total last year for the development of the South Sparse gas field and the other with a consortium of Russian and Iranian companies this year for the development of two oilfields on the border with Iraq. The oil development agreement could add some 29,000 barrels a day (b/d) in five years’ time to Iran’s oil production.

    Many foreign major oil and gas companies were hesitant to sign development deals with Iran because of the uncertainty over the US changing position on the nuclear deal.

    The attitude of president Trump and his threat to walk away from the nuclear deal has exacerbated the problems facing Iran in attracting foreign investment.

    While the reintroduction of American sanctions against Iran will not affect the country’s current level of oil production, it will take Iran far longer to repair its damaged oil industry and raise production in coming years.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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