Iran Seeks to Reassure Cautious Oil Investors

Iran Seeks to Reassure  Cautious Oil InvestorsIran Seeks to Reassure  Cautious Oil Investors

Iran sought to reassure investors of its commitment to present new and improved oil contracts, downplaying domestic opposition to the return of international energy companies.

Mohammad Nahavandian, President Hassan Rouhani’s chief of staff, told the Financial Times that the lifting of sanctions was a “win-win” situation for Iran and the West, and that it wanted “constructive interaction” with the outside world.

“We have to think about the future, and cooperation between the Iranian economy and the outside world would be beneficial to us all,” he said.

Iran’s Oil Ministry cancelled a long-awaited conference to publicize a new contract for international oil companies in London last month after it was met with domestic opposition who say the new contracts would pave the way for international oil companies to loot Iran’s natural resources.

Nahavandian said the Rouhani administration was working with its critics to resolve the issue.

“The government has decided to go ahead with the expansion of the oil industry and foreign investment is required for this. We have revised the framework of the [oil] contracts,” he said.

 “It is not finalized yet; it is open for comments. You cannot call it opposition but there are differing opinions and the government would like to incorporate all these views.”

Nahavandian also delivered a keynote speech at the FT Iran summit, making it clear that Iran was open for business.

“We are making a positive environment,” he said.

“We and the world can be backward-looking and fearful or forward-looking and realistic,” he said, listing a number of sectors—from oil and gas, minerals, manufacturing and tourism—that offered opportunities for investors.

Stiff Opposition

But opposition to the opening of the economy cast a shadow over Nahavandian’s comments, with foreign oil executives in particular complaining that there was too much uncertainty for them to commit to investing in the country.

Iran is trying to increase its oil output and exports after sanctions put a strain on its energy sector and the economy.

The Islamic Republic says it has already fulfilled its short-term target to boost crude production capacity by 500,000 barrels per day and will add another 1 million bpd in a year. Once the second-largest producer of the Organization of Petroleum Exporting Countries and now its third-largest, Iran’s oil output averaged 2.8 million bpd in 2015, down from 3.6 million barrels in 2011.

Seyyed Hamid Hosseini, founder of Meraat International Group and member of the board of the Iranian Oil, Gas & Petrochemical Products Exporters’ Union, said although Iran could grow production to reach its pre-sanctions output capacity alone, it would need investment to expand further.

“We need contracts, tenders and technology,” he said, describing Iran as a “garden” in need of nourishment. “Money for the Iranian economy is like water.”


Continued uncertainty leaves the international oil industry unwilling to enter the country.

“Oil companies are negotiating in a vacuum. It’s all theoretical at this stage,” said Sue Millar, a sanctions lawyer at Stephenson Harwood. “They all know what they want but whether Iran can deliver contractually or politically is another matter. There are so many unanswered questions.”

The concern was echoed this week by French giant Total that is taking steps to return to the Iranian energy market but wants warrant for business continuity in the face of sanctions.

"Total's new contracts [with Iran] should be [devised] in a way that the return of sanctions do not pose a risk to them," Stephane Michel, the head of Total's Middle East exploration and production division, said this week.

Nahavandian said Iran is aiming for economic growth of 8% a year over the coming decade and much of this will be by fuelled by constructive interaction with the West.

“Iran has much to contribute to the world,” Peyman Qorbani Aqilabadi, vice governor of economic affairs for the Central Bank of Iran, told the summit. “The opportunity for foreign investors is enormous.”