JCPOA, Renewed Chance for Iran Oil Sector
I am here at the Office of Deputy Minister of Petroleum for International Affairs and Commerce. In this department, policies are made about negotiations with foreign parties about selling oil and petroleum products and also investment.
Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamani-Nia tells “Iran Petroleum” that Iran's petroleum industry feels better after the implementation of the Joint Comprehensive Plan of Action (JCPOA), the official title for Iran's nuclear deal with world powers.
Here is the full text of the interview Mr. Zamani-Nia gave to “Iran Petroleum”:
Q: More than a year has passed since the JCPOA was signed. How do you assess the international standing of Iran's petroleum industry?
A: In one sentence I have to say that thanks to the JCPOA, Iran's oil and gas industry is feeling well. At present there are certain challenges on the way of development of Iran's petroleum industry, but they are domestic and need to be settled domestically. In other words, we can now make best use of our oil and gas reserves. Our crude oil and gas condensate exports reached 2,600 mb/d (during October).
I have also to note that given the country's reserves, oil and gas industry has been less developed in Iran than in neighboring countries. Of course the reason is not shortage of skilled manpower. Our petroleum industry experts are knowledgeable and experienced enough and they are at a much higher level than their counterparts in regional countries in terms of technical and engineering knowledge. Therefore, if we do not have a progressive growth over the coming 10 years and fail to make up for the past and fail to have at least several international oil companies, we would have nothing but to blame ourselves. The JCPOA has given us the chance to upgrade our scientific and technical capacities to work in a globally competitive atmosphere. We have such potential.
Regarding the effects and the outcome of the JCPOA, I have to say that over the past six months we have exported on average more than 2 mb/d of oil. For instance, in September, more than 2.175 mb/d of oil was exported and we predict to smash the record of Iran oil exports in the current year. Therefore, our conditions have improved from the days when our exports had declined to around 850,000 b/d, and our exports have now nearly tripled. We owe this success to round-the-clock efforts by the oil industry staff and the strategic management of the minister of petroleum, in person.
Meantime, equipment and commodities that had been confiscated in different ports across the world in recent years, were cleared after the JCPOA took effect. At present, big and small oil companies in the world are competing for presence in this vast industry. Add to this a 40% decline in the new equipment purchase and delivery costs, because in the past we had to spend a lot for circumventing sanctions.
Q: One of major obstacles created in the past years due to the sanctions was banking and insurance restriction in international interactions. However, these restrictions have not yet been lifted even after the JCPOA came into force. What do you think?
A: One of challenges to the implementation of the JCPOA, is that interbanking relations between Iran and the world have not yet been back to normal and the prevailing trend needs support and training ,as well as creation of a healthier environment in financial and monetary interactions. Currently there are financial transactions under way with regard to oil sales and revenue from exporting oil and condensate is received. But we have to spend time and deal with these cases one by one, before the money is received. But under normal circumstances, without spending too much energy revenue from crude oil exports is transferred.
That the Americans do not fulfill their obligations under the JCPOA, is a totally separate issue which has been explained thoroughly to our public opinion. I think that the European banks' unnecessary prudence in resuming their banking interactions with Iran has not been made clear for either party in the negotiations. Anyway, the American side is responsible for the protracted normalization of banking relations.
Regarding investment, we have not yet had any significant experience since the JCPOA took effect; therefore, it is a bit early to speak on this issue.
All small and big foreign companies like Russian, Chinese and European ones willing to invest in Ira's petroleum industry will have to find an international bank or institute to finance their projects. We do not know whether or not large or medium banks would be ready to cooperate with these companies. However, I think there would be challenges on the way. In the short-term we could not attract big investment. If we manage to attract $3bn to $4bn by the end of the current [calendar] year [in March 2017), we will be financing part of our prioritized projects in oil field development. I am very optimistic on this issue.
Iran's petroleum industry is at the beginning of the way for development, but when compared with other countries particularly in the Middle East, it is attractive enough to be able to attract foreign investment. Moreover, Iran is a secure and politically stable country. That is a very important and valuable factor for foreign investors.
Q: Since taking office, Mr. Zangeneh (the minister of petroleum) followed up on the issue of restructuring of Iran oil contracts. This issue finally came to fruition after twists and turns and the first new-style contract was signed with an Iranian company. The question here is to know why this agreement was signed with an Iranian company.
A: Advocates of buyback contracts are few both at domestic and international level. This model of contracts heavily depends on the type of the field and its development. The capital market is currently reluctant to invest in oil fields for a variety of reasons including economic recession in the world and rather low oil prices. This issue has boosted competition between hydrocarbon-rich countries for attracting international investment and finance. Therefore, the new oil contracts are more acceptable than buybacks to domestic and foreign companies. Now, when you ask why this model of contracts was started with a domestic company it is a policy adopted by the Iranian Ministry of Petroleum. But I know that negotiations have started with foreign companies since several months ago. In coming weeks we will definitely see signature of such contracts with other domestic companies and also with foreign companies.