Oil Sector in Iran More Attractive to Majors

The chase is on for some of the most prized oil and gas assets in the world, following the lifting of sanctions on Iran earlier this year. The historic deal paved the way for the country to rebuild its lost production capacity and win back market share.

If all goes as planned, Tehran's oil officials will attract roughly $200 billion in new oil and gas investment, CNBC reported.

In October the National Iranian Oil Company, or NIOC, began taking applications from foreign firms for some 50 crude and natural gas projects around the country. While details are not available, these include deals from European giants Royal Dutch Shell, France's Total and Italy's Eni, as well as Russian and Chinese drillers, according to NIOC.

However US-based oil majors, like Exxon and Chevron, are restricted from bidding by American sanctions on Iran.

"All the big players are hovering around Iran, but in the shadows," said Chris Weafer, co-founder of consulting agency Macro Advisory Partners.

"We are absolutely aware that everybody is engaged at some level. It's because the prize is too big not to be engaged," he said, adding that no one wants to give up ground to competitors.

The stakes are high. Iran is home to the world's fourth-largest reserves of crude oil and second-biggest deposits of natural gas, and much of it is relatively cheap to extract. Its energy assets are staggering; the OPEC producer has 158 billion barrels of oil and 1.2 trillion cubic feet of natural gas.

NIOC says the proposals under consideration include Total's submission for South Azadegan, a field bordering Iraq that contains an estimated 5 billion barrels of recoverable reserves.

Total, along with Eni and Hyundai, also proposed developing the South Pars field, one of the world's largest natural gas prospects. Shell and Sinopec, meanwhile, have their eyes on assets in the Yadavaran Field, another multibillion-barrel oil play, NIOC said.

Russia-China Nexus

Investors in Iran's energy sector face huge challenges. One is competition from Russia and China. Already, Russian oil firms, like Lukoil and Tatneft, have signed oilfield deals with Iran.

Meanwhile, Chinese energy giants, like Sinopec and China National Petroleum, are also getting back into the game. The companies never truly left Iran, because they were protected by a provision of the sanctions that allowed companies to invest less than $20 million per year into Iran's oil and gas industry.

Experts say competition from China poses a real risk to western oil companies. Given that China's domestic production is declining as the nation's producers cut capital spending in the face of persistently low oil prices, the Chinese energy giants may be "extra motivated" to look for international opportunities, Cowen & Co. analyst Sam Margolin said.