Foreign Finance Crux of Oil Industry Development

Oil Minister Bijan Namdar Zanganeh said attracting foreign investment will be the centerpiece of his ministry in the next four years, hoping to build up on a multibillion-dollar gas deal with France's Total that is widely seen as one of his signature accomplishments as oil minister.

"Attracting investment to develop joint hydrocarbon reservoirs through agreements with multinationals as well as completing the value chain in petrochemical industry are high-priority issues," Zanganeh was quoted as saying by Shana, the Oil Ministry's official news agency, on Saturday.

Zanganeh on Sunday won the lawmakers' vote of confidence to keep the reins on one of the most important ministries in Iran for four more years under President Hassan Rouhani’s second and last term as president.

"To keep the wheels of the oil industry spinning, the key energy sector is required to attract $200 billion in investment over five years," he added.

Total sealed a $5 billion deal in July to develop Phase 11 of South Pars Gas Field in the Persian Gulf in cooperation with Iranian and Chinese partners, making it the first major western company to return to Iran after last year's lifting of sanctions.

He asserted that new energy ventures can help create tens of thousands of jobs, particularly in the oil-rich provinces in the south.

"Should we win foreign investors' trust to develop oilfields and implement enhanced oil recovery projects, the economy will gradually prosper," he said.

The average rate of recovery from Iranian oilfields is expected to reach 40% from around 25%. Officials say some oilfields are past their peak production and the country needs to implement enhanced oil recovery techniques to draw the most from crude reservoirs before their permanent decline.

Asked about the country's refining capacity, Zanganeh said, "Iran's crude processing capacity will stand at 3 million barrels per day by 2022. Moreover, petrochemical plants' revenues will exceed $40 billion per annum."

Iran shares oil and gas fields with Iraq, Qatar, Saudi Arabia, Kuwait and Oman, most notably the South Pars field in the Persian Gulf that is shared with Qatar as well as several oilfields straddling the Iran-Iraq border.

"Boosting output from oilfields with Iraq, namely Azadegan, Yadavaran, Yaran as well as Azar Oilfield in Ilam Province and the oil layer of South Pars, is high on the agenda," he said.

Under the leadership of Zanganeh, Iran's crude output has climbed to the pre-sanctions level of around 4 million barrels per day and is slated to rise to 4.7 million bpd in four years.

--- Gas Industry

The veteran minister told Majlis on Sunday that annual gas exports amount to 10 billion cubic meters, yet plans have been devised to increase it to 70 bcm.

Zanganeh accelerated the development of South Pars phases, pushing Iran's extraction rate to match that of Qatar after playing second-fiddle to the Arab nation in terms of production from the giant gas field for the past two decades.

Iran produces around 880 million cubic meters of gas a day, two-thirds of which come from South Pars.

---- Petroleum Contracts

Highlighting the role of domestic manufacturers of oil and gas equipment in developing oil and gas capacities, he said, "The new Iran Petroleum Contract [aka IPC] is the first oil contract that clearly stipulates a role for domestic oil and gas equipment manufacturers."

According to the minister, based on the terms of IPC, Tehran will sweeten its contracts for foreign companies if they incorporate more Iranian firms in their development projects.

"We will use the potential of domestic companies as the main or secondary contractors … Foreign firms that come to Iran should select an Iranian firm as partner. This will help us strengthen domestic companies," he said.

Zanganeh believes that as long as Iranian oil and gas equipment producers do not interact with foreign firms, they will not be able to play a key role in the global energy market.