Malaysian Minister Explores Closer Energy Ties in Tehran

Tehran and Kuala Lumpur have converging interests in boosting ties in Iran's petroleum sector, Oil Minister Bijan Namdar Zanganeh said on Saturday, underlining oil trade as a positive step to improve economic and energy ties.

Zanganeh made the statement in a meeting with Mustafa Mohammad, Malaysia's minister of international trade and industry in Tehran, Shana reported.

"Malaysian corporations, including its state oil company (Petronas) are willing to invest in Iran's oil industry and we are equally interested," Zanganeh said.

He recalled the two countries' ties in upstream petroleum projects before the tightening of international restrictions in 2011 and 2012 over the dispute on Tehran's nuclear program that significantly hampered its economic and energy development.

Zanganeh said that Petronas' footprint in Iran goes back nearly two decades ago as a contractor of South Pars, Iran's mega gas project in the Persian Gulf, alongside energy giants such as France's Total S.A.

According to energy market data provider The Oil & Gas Year, Malaysia has more than 3,500 companies in the hydrocarbons industry, but Petronas is by far the biggest.

Similar to hundreds of international integrated oil and gas companies, Petronas has been severely affected by the fall of oil prices which have more than halved from their peak levels in 2014.

In Feb. last year, Petronas cut its 2015 capital expenditures budget after reporting a $2 billion loss in Q4 2014, posting its first loss since it began reporting quarterly results since 2010. Petronas has since struggled to upend its financial misfortunes, having reported a massive 96% drop in quarterly profit for the three months through June.

  Role for Small Players

Zanganeh said Iran is interested in collaboration with Malaysia's lower-tier oil and gas firms, "but they should be financially able and prove their competence."

The minister stressed that should small and medium-size Malaysian companies invest in Iran's upstream projects, they would be remunerated from the output of the oil/gas fields they develop.

Iran is trying to raise billions of dollars in foreign investment to develop its key oil sector hit by years of financial restrictions and underinvestment.

The No. 3 OPEC producer has raised crude output by more than 1 million barrels since the sanctions removal nine months ago, and is on track to reach its peak pre-sanctions crude production level of around 4 million barrels per day by the yearend.

Zanganeh also told the Malaysian minister that taking slow and steady steps, such as short-term oil and byproducts export contracts, would ease cooperation in multibillion dollar projects.

Iran shipped between 50,000 and 60,000 bpd of crude oil to Southeast Asia's third-largest economy before sanctions.

Malaysia has ramped up oil imports in recent years as exports have declined over the past decade.

Data provided by Malaysia's Finance Ministry show that in 2005, the country produced 60,000 barrels per day of crude and between January and November 2014 it was down to 48,000 bpd, prompting Kuala Lumpur to diversify petroleum supplies to meet domestic energy demand.

Mohammad heads a trade delegation of Malaysia's private and state companies on a three-day visit to Tehran. The trip comes after President Hassan Rouhani toured the three East Asia nations of Vietnam, Malaysia and Thailand two weeks ago.