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Russia’s Rosneft Quits Iran, $30B Of Potential Joint Investments

Russia’s largest oil producer Rosneft has decided to quit Iran and the possibility of US$30 billion worth of joint Russian-Iranian investments in oil and gas projects in the Islamic Republic, Russian business daily Vedomosti reports, quoting three sources close to Rosneft’s top management.

In November last year, Rosneft and the National Iranian Oil Company (NIOC) signed a road map for strategic cooperation in oil and gas in Iran—cooperation which Rosneft’s chief executive Igor Sechin said would involve a total of US$30 billion of investments. At the time, Russian media quoted Sechin as saying that the parties could soon sign several binding agreements, and the total production from those projects could be up to 55 million tons of oil equivalents annually, equal to 1.1 million boepd.

Now Rosneft has reconsidered its involvement in Iran, due to the U.S. sanctions on Iranian oil and due to a change in Rosneft’s strategy to focus on growing production in Russia, according to Vedomosti’s sources.

According to analysts who spoke to Vedomosti, Rosneft’s move to quit Iran is wise because risks were higher than rewards and Tehran hadn’t offered attractive terms for international investors anyway.

Rosneft is not the only Russian company said to have quit projects in Iran due to the U.S. sanctions.

Days before the U.S. sanctions on Iran’s oil snapped back, sources at Russia’s state-owned oil producer Zarubezhneft told Reuters that the company withdrew from Iran due to the sanctions.

Related: Canadian Crude Price Spike Won’t Last

Earlier this year, a local Iranian company, Dana Energy, in a consortium led by Zarubezhneft, signed an agreement with the NIOC to redevelop the Aban and West Paydar oilfields, with total capex estimated at around US$740 million.

But now Zarubezhneft is said to have decided it was best for it to quit the Iranian project.

“Zarubezhneft left all the projects in Iran due to sanctions,” a source told Reuters in early November. “We would lose foreign currency revenue had we’d been hit by the sanctions.”

Lukoil, Russia’s second-largest oil producer, said as early as in May that it was putting its plans to develop projects in Iran on hold, due to the U.S. sanctions.  

By Tsvetana Paraskova for Oilprice.com

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