MPs Warn Oil-Based Economy Not Sustainable

An economy held captive to the price of oil and largely dependent on crude export revenues is apparently not a functioning economy, two members of the Majlis Energy Commission said on Sunday.

"Our national budget has for long relied heavily on crude exports despite efforts to wean the country off this practice. The conundrum can be primarily attributed to the slow pace of infrastructure development and attracting technical expertise to augment downstream industries," Ali Adiani was quoted as saying by ISNA.

"Completing value chains and developing petrochemical and industrial infrastructure do not mean that oil export should be halted as we need to maintain our share in global markets," he said, adding that limits ought to be defined for oil exports.

"The major share of our production should be converted to high added-value products inside the country instead of being processed overseas," he added.

According to the lawmaker, maximizing oil export means neglecting the far more lucrative opportunities for economic growth and development.

"The black gold can generate substantial profit only if we are capable of processing it. Shipping out low-value added products is no more an option" as it undermines national interest, he added.

Comparing oil to other valuable materials like ornamental stones, he noted that processing such commodities will help generate higher revenues; otherwise the processed products from other countries have to be imported at double or triple the price sold to them.

"Our country has extracted and sold crude oil for over a century. But we have been oblivious of the fact that creating efficient infrastructure and acquiring    technical expertise are indeed crucial," the legislator was quoted as saying.

Adiani opined that exporting oil can be of great benefit if the income is used for innovation and scientific advancement to manufacture value-added products, which in turn would lead to economic prosperity and growth.

  Last Resort

According to Hedayatollah Khademi, another member of the Majlis Energy Commission, domestic experts are equipped with the knowledge to design and construct refineries, and that is why shipping out crude oil should be the last option.

"Access to cutting-edge technology and expertise must be given priority over crude exports," Khademi noted, adding that "selling crude oil is normally the easiest way out in the underdeveloped states."

He recalled that "Although some countries have no hydrocarbon reserves, their access to state-of-the-art technology helps them earn much more than the oil-rich states."

Underscoring the fact that spending big on producing low-value oil products cannot help develop much-needed infrastructure, Gholamreza Sharafi, a member of the Energy Commission said, “Investing in the downstream petrochemical sector will yield a reasonable return, which explains why the  Energy Commission has recommended the Oil Ministry put such investment programs high on its agenda.”

The downstream sector commonly refers to the refining of crude oil and the processing of raw natural gas, as well as the marketing and distribution of products derived from crude oil and natural gas.

Stressing that attracting domestic funds should be a top priority in the new oil contracts, known as Iran Petroleum Contract, Sharafi said if domestic financial resources are insufficient (then) plans should be devised to attract foreign investments.

Iran is in dire need of heavy investments in its aging oil and gas production infrastructure to revive its ailing economy on the back of years of sanctions and underinvestment.