Sanctions Removal to Halve Cost of Oil Projects

Sanctions Removal to Halve Cost of Oil ProjectsSanctions Removal to Halve Cost of Oil Projects

The lifting of international sanctions against Iran will gradually halve the total cost of the country's incomplete oil projects, executive director of Iranian Offshore Engineering and Construction Company said.

"We faced several hurdles under the sanctions: foreign companies that overcharged for equipment, having to deal with one or several brokers, high transportation costs and extra expenses for the transfer of foreign exchange," Gholamreza Manouchehri was also quoted as saying by IRNA.

He added that the cost of oil projects shot up after the US and the EU introduced tougher financial and trade penalties against Iran over its nuclear program, but "now that these barriers are removed, expenses are expected to be cut by half".

Iran and six world powers reached a watershed agreement in July 2015 on placing time-bound curbs on the Persian Gulf nation's nuclear ambitions in exchange for lifting the majority of international sanctions against it.

The deal took effect on January 16, paving the way for the Islamic Republic to reconnect to the global financial system and resume dialogue and trade with the outside world.

Major international companies scrapped their projects in Iran's oil and gas fields in fear of violating US embargos that strictly limited trade and cooperation with Iran.

With the exodus of European companies, Iran saw its options limited and turned to Asian contractors to keep the wheels turning in its key oil industry.

Cooperation with Chinese contractors was particularly a mixed blessing, as they stood by Iran in dire straits but more often than not failed to live up to their contractual commitments.

--- Rebound

Manouchehri did not specify a timeframe for the rebound of Iran's oil industry, as analysts and officials say it will take months, even years, before Iranians can feel the economic benefit of the nuclear deal.

But signs of recovery are already starting to show as the sanctions removal has immediately greased the wheels of foreign trade.

Iran spent $160,000 a day to lease foreign drilling rigs under the sanctions regime, but costs have already halved after the implementation of the nuclear deal in January, according to Rokneddin Javadi, a deputy oil minister and head of the state-run National Iranian Oil Company.

Moreover, Iran received the first batch of its blocked oil equipment from German powerhouse Siemens in February. The equipment, including high-tech turbines and compressors, were blocked in the UAE and the Netherlands for more than three years.

--- Backing the IPC

The IOEC chief supported Iran's new oil and gas contracts, officially known as Iran Petroleum Contract, which has been subject to domestic dispute in recent months.

In November, Iran introduced dozens of oil and gas development projects in a conference in Tehran to be tendered under the new contractual framework in future.

Manouchehri said in a statement the new contracts would allow domestic firms and foreign contractors to team up in Iran's lucrative projects. He was referring to a clause in the new contracts that obliges foreign contractors to choose an Iranian company for partnership.