Will Iran become number one energy player in Middle East?

Friday 01/05/2015
New contracts to lure energy majors back

TEHRAN - A nuclear agreement will allow Iran to become the number one energy player in the Middle East and herald major opportunities for foreign companies, top Iranian officials said Wednesday.
The remarks, at an industry event in Tehran, underlined the broader political and economic implications should sanctions on Iran be lifted under a deal, following long-running diplomatic efforts with world powers.
Iran has the world's fourth largest proven oil reserves and the second biggest gas deposits, both of which are seen as long under-tapped and ripe for exploration.
But its exports have halved since US and EU sanctions were imposed in 2012 as punishment for Tehran's disputed nuclear programme.
Oil Minister Bijan Zanganeh, who in recent months has signalled Iran's willingness to see global oil giants return, said international cooperation was essential.
"We have to use the foreign companies that will come to us after the removal of sanctions... to increase exports and access regional markets," he said in a speech at Iran's 20th Oil, Gas, Refining and Petrochemical Fair.
"It is understandable that they left us during hard times. But we hope to prepare ourselves to work with them for a future in which we become the industry's number one in the region."
The prospects for doing business are inextricably linked to whether Iran and six world powers can conclude a nuclear accord by a June 30 deadline.
The comments also seemed aimed at Saudi Arabia, the world's largest oil exporter, with which Iran is locked in a fierce dispute over the conflict in Yemen.
During the nuclear crisis Iran has relied on domestic oil firms and though this will continue, Vice President Eshaq Jahangiri, at the same event as Zanganeh, said: "We don't have any other option but to join the international production and distribution chain."
New contracts prepared by the oil ministry would lure energy majors back, he said.
"We expect that after presenting the models of the new agreements, which are based on the realities of the global energy market, they will be so attractive that it will bring the foreign investment.
"Iran is very determined that after a very short period of time after signing the nuclear agreement that we can take back our position in the global oil industry," Jahangiri added.
According to the oil ministry, 1,200 Iranian companies and 600 international businesses from 29 countries including Britain, China, France, Germany, Russia, Singapore and the United Arab Emirates registered for the four-day Tehran exhibition.
But with crude prices hovering around a lowly $60 a barrel as the market experiences a supply glut, the chances of an economic windfall for Iran or international companies is difficult to gauge.
While oil and gas was long the cornerstone of Iran's finances, the global fall in crude prices has led President Hassan Rouhani's government to seek a more varied economy.
And in the budget for this year Iran halved its reliance on oil income to 25 percent. Foreign companies are also weighing the cost of doing business in Iran against the potential returns.
Under Iranian law, foreign entities in the oil and gas sector must partner with local firms.
But the development of oil and gas sites, including the massive South Pars gas field, shared with Qatar, and the West Karoun oilfield, offer significant potential for foreign tie-ups.
Having agreed an outline framework for a deal on April 2, Iran and the P5+1 powers (Britain, China, France, Russia and the United States plus Germany) aim to conclude a final accord by the end of June.
Under an interim deal that came into effect in January 2014, which gave some sanctions relief, Iran has been allowed to maintain its crude oil exports at around 1.2 million barrels per day -- less than half of what it was shipping in late 2011.
Production capacity is now around 2.7 million bpd but the ministry has said it could reach 4 million bpd within a few years.

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