Zanganeh Seeks to Reassure Global Energy Companies

Iran's oil minister says the capacity of the National Development Fund of Iran is very limited and the Central Bank's resources have depleted after providing billions of dollars in loans to the oil sector
Iran needs to collaborate with multinationals to attract $130 billion in its petroleum industry by 2021.Iran needs to collaborate with multinationals to attract $130 billion in its petroleum industry by 2021.

A day after a multibillion-dollar energy agreement with Total S.A. and CNPC, the first major post-sanctions deal with a western major, Oil Minister Bijan Namdar Zanganeh tried to muster confidence among international investors wanting to enter Iran's lucrative energy market.

"We hope the deal with Total to develop Phase 11 of South Pars Gas Field will encourage other companies to cast aside uncertainties and invest in Iran's petroleum industry," Zanganeh was quoted as saying by Shana, his ministry's news agency.

On Tuesday, state-run National Iranian Oil Company signed a $4.8 billion agreement with Total, China National Petroleum Corporation and Iran's Petropars to develop Phase 11 of the giant South Pars Gas Field in the Persian Gulf in what would place the French oil giant at the helm of one of the most important and least-developed energy projects in Iran.

According to officials, the three sides on Tuesday signed "an agreement in principle" with the final contract expected to be sealed early next year, effectively paving the way for the return of Total after a six-year hiatus.

Total was active in developing Iranian energy projects for more than 20 years, including the development of several South Pars phases. But it ceased operations in 2010 following disagreements over contract terms and pressure from the French and US governments over oil and trade embargos against Tehran.

The oil minister recalled plans to attract $130 billion in investments by 2021 and underlined the need for collaboration with multinationals to finance the lion's share of the sum.

"The oil industry needs technology and investment to grow," Zanganeh said.

He added that reservoir engineering—a branch of petroleum engineering concerned with oil and gas reserves and finding the most efficient way to extract underground resources—would be one of the key technologies to be transferred in cooperation with Total.

"It is not just about reservoir engineering. Knowhow means completing a project in four years instead of 12."

Zanganeh also pointed to funding constraints at home to defend the partnership with foreign companies, a subject of scathing criticism in recent months from some political opponents of President Hassan Rouhani and his government.

"We have developed several projects such as West Karun oilfields and South Pars phases on the back of the National Development Fund of Iran. But the fund's capacity is very limited," said the minister. "The Central Bank of Iran also provided billions of dollars in loans to the oil sector and its resources have depleted."

  US Election Concerns

Amirhossein Zamaninia, the deputy oil minister for international affairs, also responded to worries over the future of the oil market and Iran's nuclear deal following the shocking US election results that sent the global markets into meltdown on Wednesday.

He appeared confident that Donald Trump's victory would not have much impact on Iran's nuclear accord with the six world powers but admitted that "he would be unpredictable."

Zamaninia also referred to four decades of severed ties between Iran and US and played down the possibility of collaboration with American companies in the near future with the new occupant in the White House.

"Certain boundaries and restrictions are in place against any potential cooperation between Iranian and American companies in the oil sector."  

Tehran Iran has opened up its economy to international investors following the lifting of sanctions in mid-January, but some domestic vested interest and stakeholders have sought to block the path foreign firms returning to  Iran, claiming that western firms want to "plunder Iran's natural resources."'

Tehran hopes to ramp up crude oil and natural gas production by developing dozens of new  projects in collaboration with foreign oil majors.

The No. 3 producer of the Organization of Petroleum Exporting Countries produced close to 4 million barrels per day of crude oil last month as exports reached 2.44 million bpd, Zanganeh said in a TV interview Tuesday night.

Gas production is also slated to reach 900 million cubic meters per day by the fiscal yearend in March and exceed the 1-bcm/d mark in the following year.

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