Focus on Iran: New oil & gas business opportunities

Once the sanctions imposed by the UN were lifted, Iran immediately attracted the major global energy companies. The country ranks second in the world in terms of proven gas reserves (34 trillion cubic meters) and fourth in terms of proven oil reserves (157.8 billion barrels). According to estimates, Iran could provide Europe some 35 billion cubic meters of gas by 2030.

Iran’s entry on the European market will have political impact as well, given that it will diminish the European Union’s dependence on Moscow gas, which exports now about 158 billion cubic meters of natural gas to the EU. What would a competitor like Iran mean for Russia? For example, the Iranian reserves in southern Pars, shared with Qatar, is10% of the world gas reserves and 60% of Iran gas reserves. The output value that can be achieved from the Iranian deposit is valued at about USD 4 billion per year.

Unexploited deposits

Currently, there are about 150 oil fields in Iran with nearly 300 oil and gas deposits. Due to the sanctions imposed by the UN, foreign investments lacked, leaving most of these deposits unexploited. According to Tehran’s plans, Iran aims to increase production and export of crude oil, so it will reach 4.7 billion barrels in 2020, given that the output in January 2016 had reached 2.8 billion barrels and in January 2017 reached 3.7 billion barrels. Also in 2020, the gas production would reach 180 billion cubic meters and the one of liquefied natural gas would reach 1 billion cubic meters. In order to achieve these targets, Iran needs massive investments in oil and gas, and thus has auctioned about 70% of its reserves. The new contracts proposed by Iran Petroleum to the world energy giants are for a period of 20-25 years, compared to previous contracts of 7-10 years. Also, in order to improve the transport infrastructure, it is considering launching a bond issue worth USD 4.5 billion.

Still pending...

The second deadline for international companies to file bids for oil and gas development projects in Iran expired at mid-February. No less than 29 major oil companies submitted bids to obtain new licenses for exploration and production, among them are the Gazprom, Lukoil, Shell, Eni and Total groups. Also interested are the US group Schlumberger, CNPC and Sinopec (China), Mitsubishi and Japan Petroleum Exploration (Japan).

Gazprom open for cooperation

Gazprom is interested in developing two energy projects in the oil fields of Sangule and Cheșmeh-Khoș in Iran, but it looks open to other projects, the company’s first Vice-president Vadim Yakovlev said. “For now, only Sangule and Cheșmeh-Khoș,” Yakovlev said, adding however that Gazprom is considering participating in other joint projects concerning the development of Iranian oil fields.

Iran to deliver LNG to Europe in two years

Last year, the Iranian officials announced that they are interested in developing also liquefied natural gas plants, and the first deliveries to Europe will take place in two years. Alireza Kamel, director of the National Company of Gas Export, said at the time that Tehran was conducting negotiations for the construction of such plants with several European groups, including Golar LNG.
Therefore, in the coming years, in terms of business development, the opportunities provided by Iran for European oil & gas companies, and not only, are just beginning...

EU and Iran

Federica Mogherini

Relations between the EU and Iran have been through different stages and most recently, over the last decade, conditioned by the international dispute over Iran’s nuclear programme, and the consequent sanctions regime that was in place against Iran. Having reached on 16 January 2016 ‘Implementation Day’ of the Joint Comprehensive Plan of Action (JCPOA) on Iran’s nuclear programme (14 July 2015), the way is now opened for a renewal of broader relations.
“This is a deal that exactly one year after has delivered both on the nuclear-related commitments Iran took and on the firm determination of the international community, starting with the European Union, to fully implement also its part of the deal. One year later we have seen, for what concerns EU-Iran relations for instance, an increase in trade and economic relations that is really significant,” Europe’s foreign affairs chief Federica Mogherini stated on the occasion of the first anniversary of the implementation of the JCPOA.

EU trade relations with Iran

  • China and the United Arab Emirates are now Iran’s main trade partners, followed by the EU. The EU used to be the first trading partner of Iran before the current sanctions regime.
  • Balance in trade with Iran was EUR 5.2 billion in 2015. Trade balances for the previous 10 years with Iran were mostly negative (except for 2009).
  • The EU exported almost EUR 6.5 billion worth of goods to Iran in 2015. EU exports to Iran are mainly machinery and transport equipment, chemicals and manufactured goods.
  • The EU imported over EUR 1.2 billion worth of goods from Iran in 2015. Most EU imports from Iran are energy-related (mineral fuels), followed by chemicals, manufactured goods and food. Due to sanctions, EU oil imports from Iran came to a halt.
  • Total EU imports from Iran decreased by 86% between 2012 and 2013. Total EU exports decreased by 26% during the same period. In 2014 EU imports from Iran increased by 48% and EU exports increased by 18%.

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