Q: With regards to current oil prices, what will happen to shale oil and gas?
R: If a year ago you had said oil will be $50 a barrel people would have told you this would mean a big decline in the production of shale oil. If you ask them today they will say there will probably be some decline but not very big. They are adapting to new situation much faster than we ever expected. The assumption with shale was that if the cycle of price change was shorter, the impact was greater, yet it hasn’t happened quit like that. It says if the decline has been less, the willingness to continue a degree of new investment which is required for continued development of shale oil and gas will be much greater than we expected. And in this case costs would appear coming down. So if Saudis did really have an idea of driving shale out of the market, it's failed. Shale production is a factor with which all other producers have to live. At the same time of course there is more shale production in the United States. I think we sometimes forget US talks of being energy independent but it is really North America that is energy independent. And that is its balance of energy that makes it energy independent. The US still imports 5 million barrels a day from other countries. And more important although US import oil but it's not a price setter on oil. The shale gas production is one element in price making. In that regard OPEC is a far more important factor. Basically the real problem is slow growth in the global economy, the way the Chinese growth is slowing down. All of those coupled with such other drivers as a wish to promote energy efficiency for its own sake, a wish to reduce carbon emissions which means to promote renewables, all of this impacting on the place that oil has in the global energy mix. And yet production remains pretty strong and we have this very very strange situation. Ten or fifteen years ago theorists were arguing about peak oil and the world not being able provide enough oil just for supplies. We are now far more seriously looking at peak demand. The demand for oil will rise 10 percent more probably and that’s it! Because other fuels and energy efficiency are changing the energy market.
Q: In the wake of the oil slump, small and medium-sized US companies filed for bankruptcy. Meantime, banks refused to provide them with any finance. What happened to the shale oil and gas producing companies there?
R: The first thing particularly with shale oil there were fairly limited operations. It's unique to the United States because I don’t know any other places where the mineral resources belong to the landowner. Usually mineral resources belong to state. So a company wishing to develop shale oil can approach a landowner and the landowner may be owning a few hectares, and really it’s the matter of money that the landowner let the company drill in land or not… That transaction is upfront and I presume that everything happen within a period of months. So if one venture goes bankrupt it's probably because it hasn't produced as much as it was expected and therefore it's not a good bet for continuing operations in that area. But if one company goes bankrupt there are 2 or 3 more companies next door who are doing better… The big giants of the energy industry ExxonMobil and Chevron they were late to come in on it. … Smaller companies have to be leaner and have to be more efficient.
Q: New reports suggest that investment in the oil and gas sector declined $300 billion following the oil crash. What does it mean for Iran, a country which needs such investment?
R: I don’t know what precisely reaction was to IPC, but if Iran needs to attract $100bn investment then it has to offer very considerable rewards… It's about how to put the element of risk and reward in the contract that is sufficiently attractive to bring in foreign partners.
Q: Iran has many advantages like the massive amount of inexpensive feedstock, high security and a geopolitically strategic position in the region. Could these factors affect Iran's ability in attracting foreign investment?
R: Absolutely. The geopolitical position of Iran coupled with the extent of its natural resources and with its skills in the industry means you can develop a petrochemical or refining operation project. .. If Saudi Arabia feels it needs foreign partners. The Saudi needed for two reasons; 1. Cash which is the same as in Iran and 2. because it feels the need for advanced technologies. I think the same that's true in Iran. So you have to use your geographical position and your very good access to low-price feedstock. Buy you will need foreign partners for both cash and technology. To do that you have to make a good trading environment. And that brings us to the complicated issue of international sanctions, overall policy and all sort of political issues.