$180b Needed in Oil Investments

$180b Needed in Oil Investments$180b Needed in Oil Investments

Oil industry requires $180 billion worth of investments in upstream and downstream sectors to undertake oil and gas projects during the sixth five-year development plan (2016-21), managing director of investment at the National Iranian Oil Company said on Wednesday.

Giving a breakdown on the need for new finance, Ali Kardor said Iran needs $100 billion worth of investment in exploration and production, while for the downstream sector commonly referred to as refining, marketing and distribution of natural gas, it requires $80 billion,  IRNA reported.

According to the official, investment worth $75 billion was made in the oil sector in the past few years.

Kardor added that the 8% economic growth target stipulated in the sixth plan will not be realized unless $100 billion in investment are attracted.

The massive investment is rational, as development parameters have already been laid down.

Underscoring the National Iranian Oil Company's plan to provide the much-needed funds, the official said $14 billion will be allocated from the National Development Fund of Iran, $10 billion will be attracted from Engineering, Procurement, Construction and Financing contracts, $8 billion from the market, $12 billion from bank loans, $35 billion from the new Iran Petroleum Contract and the rest will be provided from NIOC's financial resources.

Kardor believes provision of financial resources in the sixth plan will pave the way for facing fewer challenges in the seventh five-year plan.

Pointing to the low expenses of implementing upstream projects in Iran, he said, "Notwithstanding the drastic decline in crude prices, which are expected to drop as low as $18, NIOC will neither give substantial discounts to its traditional customers nor stop its development plans. Nonetheless, to stimulate the economy, more revenues should be generated."   

According to Rystad Energy, an independent oil and gas consulting services in Norway, the final cost of producing each barrel of oil in Iran stands at $12.60 compared to $8.50 and $41 in Kuwait and Canada respectively.  

Kardor said in the past, NIOC provided financial resources based on short-term confidential projects during sanctions. However, it gradually replaced them with buyback contracts. Interestingly, $30 billion have been provided through such contracts.

"Based on the IPC model, foreign investors are required to have an Iranian business partner, so if international giants show interest in the new contracts, Iran will capture target markets for a long term," he said.

Kardor noted that as long as the private sector does not play a more active role in this regard, financing the development projects will be a serious challenge.

According to Amirhossein Zamaninia, deputy oil minister for international affairs, transparency, economic climate and the officials' sense of commitment in providing guarantees to foreign investors make Iran a unique place to run a major and serious business.

Highlighting the Iranian oil industry's attraction for investors, the official said plans have been made to attract $185 billion in investment to increase crude and gas condensate production capacity, optimize fuel consumption and promote energy efficiency during the sixth plan.

"The large volume of untapped oil and gas reservoirs, numerous proven oil reserves and relatively low extraction in proportion to exploitable oil compared to other regional oil players are some of the advantages of investing in Iran's oil industry," he said.

"Not only are the costs of extracting oil and skilled workers in Iran low compared to other countries, but engineering and technical operations are also of high quality."

Zamaninia believes that the sanctions era turned out to be a blessing in disguise, as it helped Iran reduce its dependency on oil revenues and improve its oil and gas industry and engineering services.