Oil Ministry Debts Reach $56 Billion

Oil Ministry Debts Reach $56 BillionOil Ministry Debts Reach $56 Billion

The Oil Ministry’s debts to banks and contractors have reached a staggering $56 billion, a deputy oil minister said on Sunday.

“The Oil Ministry’s unpaid dues owed to banks for the loans and interest stand at $52 billion. It owes $4 billion to private oil contractors,” Rokneddin Javadi was quoted as saying by ISNA.

According to the official, if oil is sold at $50 per barrel, the Oil Ministry can generate $37 billion in revenues per annum.

Pointing to the allocation of 14.5% of oil revenues to the Oil Ministry, Javadi noted that of the $37 billion in revenue, $6 billion will be transferred to the Oil Ministry’s account.

During the the sixth five-year development plan (2016-21), this will amount to $30 billion. In other words, even if the said annual revenue is realized, the ministry’s unpaid dues will be 1.5 times more than its revenues.

Underscoring the National Iranian Oil Company’s plan to raise oil export by 1 million barrels per day, the deputy minister added that the ambition cannot be fulfilled unless much-needed financial resources are provided and that definitely poses a serious challenge.

Categorizing the challenges into two major groups, Javadi said the first problem is posed by the budgeting system in providing the development funds.

“When Iran exported 2.5 million bpd and the oil price was $110 bpd, the Oil Ministry’s share of the revenues stood at $14.5 billion and notwithstanding the dramatic decline in prices and volume of export, the share is still the same,” he said.

Javadi said the second challenge is posed by international banking restrictions, which have prevented the ministry from receiving its frozen assets.

On July 14, 2015, a committee, comprising representatives of the Management and Planning Organization of Iran, Central Bank of Iran, Ministry of Economic Affairs and Finance, and Oil Ministry, was established to examine mechanisms by which the Oil Ministry could settle its massive debt.

The CBI was mandated by the budget law to provide NIOC with $10 billion in funding. However, it could not fulfill its obligation due to problems with its own revenues. At the end of the year, CBI could provide a $1 billion loan.