Iran's MP Pushes for Facilitating FDI in Oil, Gas Sectors

Iran's MP Pushes for Facilitating FDI in Oil, Gas Sectors Iran's MP Pushes for Facilitating FDI in Oil, Gas Sectors

A member of parliament has urged policy and decision makers to come up with an efficient plan of action and open up to much-needed foreign direct investment in the oil and gas sector, which is reeling from years of punitive economic sanctions and underinvestment.

"The (ruling) establishment should swiftly make up its mind on whether or not it wants foreign investment in the oil industry. Any problem on this issue (foreign investment) must be resolved (soon) because this is a priority industry," Hossein Amiri-Khamkani, vice-president of Majlis Energy Commission said in a talk with ISNA.

He recalled that oil investments took a backseat after the subsidy reform plan was launched during the tenure of former president Mahmoud Ahmadinejad and the Oil Ministry's 14.5% share from oil export revenues in the annual budget started to descend.

The so-called Subsidy Reform Plan, launched in 2010, removed heavy subsidies on some food and energy and instead pays 450,000 rials (around $13) to every Iranian every month. According to published reports an estimated 74 million Iranians from the total 80 million population get the monthly payment.

The plan was expected to be concluded in five years, but has become a heavy burden for the government. The monthly cash subsidy bill is $1.1 billion, which most respected economists and experts insist is "poison for the national economy" and should be scrapped sooner rather than later.

  Heavy Toll

Amiri-Khamkani added that sanctions have also taken a heavy toll on investments in the upstream petroleum industry.

"We faced sanctions (in 2011 and 2012) which harmed crude production and exports and virtually thwarted investments as neighbors continued to exploit the joint oil and gas fields."

Tehran and the six world powers (the five permanent members of the United Nations Security Council plus Germany) reached a landmark agreement in July of last year on curbing Iran's nuclear program in exchange for lifting some trade and financial restrictions.

The nuclear accord, known as the Joint Comprehensive Plan of Action, came into force in January, but Tehran has hardly reaped any significant benefit from the deal partly because of the air of uncertainty and anxiety among foreign companies and insurers.

“On the whole, the economic consequences have been disappointing but there was over-optimism,” Robert Powell, Middle East and Africa regional manager at the Economist Intelligence Unit, told Bloomberg. “Many in Iran probably expected too much, too soon.”

  IPC Framework

The prominent lawmaker called for fast-tracking the drafting process of Iran's new oil and gas contracts which offer better terms to multinationals to encourage them to take part in Iran's lucrative energy projects.

But the new model of contracts, known as Iran Petroleum Contracts, has been strongly denounced by the opponents of the government soon after it was unveiled in an international conference in Tehran late last year.

"There are some criticisms to the new contracts that should be addressed. We have routinely called on the opponents of the IPC to table their grievances without ambiguity," the MP was quoted as saying.

Some critics say the framework—which allows foreign contractors to operate in Iran's oil and gas fields under 20-25 year contracts—is a "concession of hydrocarbon resources".

Oil Minister Bijan Namdar Zanganeh says the first contracts under the IPC framework are expected to be signed by October.

Amiri-Khamkani underscored self-sufficiency in gasoline production as another priority in the energy sector.

"Iran has been pushing for production of gasoline that meets the Euro-4 emission standard, but some refiners are behind schedule."

Daily gasoline consumption in Iran has exceeded 70 million liters and multiple sources estimate that imports are close to 10 million to 20 million liters per day.