Iranian banks have formed a consortium to fund domestic oil and gas projects estimated at $4 billion, the Economy Minister Ehsan Khandouzi said.
"The consortium will finance energy development projects...Currently we face restrictions in getting foreign financial resources. Domestic sources can and should play a more effective role in funding infrastructure projects in the country," Khandouzi was quoted as saying by IBENA.
The consortium is expected to sign an agreement in the near future, he told reporters, adding that details of the collaboration would be disclosed after the deal is ready.
When projects are too big for one bank to fund on its own, lenders pool their resources to create a consortium bank to get the job done. A legally binding document governs the consortium’s work and delegates responsibilities among members.
Khandouzi was speaking on the sidelines of a ceremony for signing an agreement between the National Iranian Oil Refining and the Distribution Company and Bank Mellat to fund the construction of a pipeline to supply petroleum products in the eastern regions.
Construction of the 948-km pipeline will be financed by Bank Mellat. The lender is active in major energy projects and will lend €300 million for the project.
Bank Mellat is among major supporters of oil and gas projects in Iran. Reza Dolatabadi, the CEO, put his bank's total investment in the key sector at €18 billion so far.
Iran’s oil industry is facing major challenges, especially since 2018 when the US unilaterally withdrew from the 2015 nuclear deal between Iran and six world powers, and imposed new economic sanctions, including on the oil, tech, banking and transport sectors.
Iran's oil sector reportedly needs $200 billion in new investments. This includes $130 billion in the upstream sector, $50 billion in petrochemical industry and $15 billion in (downstream) refinery projects.
Officials recently said at least $10 billion is needed urgently to refurbish the dilapidated oil infrastructure and that it will be impossible to raise oil output unless the ageing upstream oil industry machinery and heavy equipment is modernized.
