Renewal of Iran's Oil, Gas Sector After Easing of Restrictions

Renewal of Iran's Oil, Gas Sector After Easing of Restrictions Renewal of Iran's Oil, Gas Sector After Easing of Restrictions

Iran's energy industry is on the road to recovery after the removal of international economic sanctions six months ago enabled the country to get access to essential technology for its oil and gas projects, an Iranian official says.

"After the nuclear deal with world powers (in January), Germans were the first to send a trade delegation to Tehran. After negotiations, Siemens released some of Iran's gas equipment for the South Pars Gas field," said Ali Akbar Shabanpour, managing director of state-owned Pars Oil and Gas Company, IRNA reported.

Iran has received 10 compressors for installation in Phase 12 of South Pars Gas Field from the German industrial giant in what was reportedly the first batch of blocked equipment delivered by Siemens after the punitive restrictions were eased.

Iran has also obtained "huge shipments of pipes and valves from major European companies" for South Pars phases 17, 18, 20 and 21, Shabanpour said.

International sanctions imposed over the nuclear dispute were officially scaled back on January 16 following a landmark agreement between Tehran and six world powers in July 2015 over placing curbs on Tehran's nuclear program in exchange for sanctions relief.

The oil official added that access to several turbo-expanders—an important piece of machinery for energy recovery and power generation in gas and petrochemical plants—has allowed Iran to speed up development of its mega South Pars gas project in the Persian Gulf.

South Pars is the world's largest gas field shared between Iran and its small Arab neighbor Qatar. Tehran is trying to catch up with the Arab sheikhdom that has exploited  the joint field to the maximum with help from the world's top energy and technology firms.

In February Iranian media reported that the Canadian government had given the green light for release of a blocked turbine belonging to Fajr Jam Refinery, Iran's second-largest gas refinery in Bushehr Province.

The turbine was reportedly sent to Rolls-Royce in Canada for repair before the international embargo was tightened in 2011 and 2012 that undermined Iran's industrial and energy projects.

Last month, Rolls-Royce said it was in negotiations with Iran's Energy Ministry on using piston engines made by the group’s power systems business in Germany.

Siemens and MAPNA Group, an Iranian energy and infrastructure conglomerate, have also reached an agreement to manufacture Siemens F-class turbines in Iran for use in gas-fired power stations.

  Foreign Investment

The nuclear agreement, officially known as the Joint Comprehensive Plan of Action, has to some extent eased foreign investment in Iran's key oil and gas sector, an Iranian economic analyst told ILNA.

“We now see many foreign companies and delegations visiting Iran following the removal of punitive sanctions,” said Albert Boqazian, who is also a university instructor.

He added that under the sanctions regime, customers of Iran's crude turned to other suppliers in fear of violating trade and financial restrictions imposed especially by the US and EU that barred multinationals from doing business in and with Iran.

“Transfer of money was a problem and investment security had become an issue,” Boqazian said, describing some of the main consequences of the sanctions.

“Tehran has come to the conclusion that it has to cooperate with foreign firms on financing and transfer of technology in the oil sector besides tapping into domestic potential,” Boqazian said.

He said to attract foreign investment and technology, Tehran has finalized a new model for its oil and gas contracts, known as the Iran Petroleum Contract, which officially got the government's backing in a Cabinet meeting on Wednesday.

The expert argued that foreign companies are positive about the amendments made to the long-awaited contractual framework.

Boqazian said reconnecting to the international SWIFT payment system has significantly facilitated payments for Iran's crude as the country has cashed in on billions of dollars of frozen oil revenues over the past six months.