As Iran oil fair opens, foreign companies weigh return

AFP , Wednesday 6 May 2015

Iran is expected to outline big oil and gas projects at a major industry event Wednesday ahead of a possible nuclear deal that could allow global energy giants to return.

The plans, which have been trailed in the Iranian media, will likely dominate Iran's 20th Oil, Gas, Refining and Petrochemical Fair, a four-day event in Tehran, which opens at 0930 GMT.

Oil Minister Bijan Zanganeh, who has signalled Iran's willingness to see international oil giants come back, is to give the keynote address.

The prospects for doing business are intricately linked to whether Iran and six world powers can conclude a nuclear deal by a June 30 deadline that could lift wide-ranging economic sanctions.

Iran has the world's fourth largest proven oil reserves and the second biggest gas deposits, both of which have long been seen as under-tapped and ripe for exploration and a production hike.

But major energy firms left or were stifled from doing business after the United States and the EU imposed sanctions on the industry in 2012, as punishment for Tehran's disputed nuclear programme.

Iranian officials have said that while the country's focus is to boost domestic production there is potential for foreign investment and cooperation, especially given modern Western industry technology.

The oil ministry has prepared new contracts that could come into effect after a nuclear deal which have better terms for foreign companies than those offered before the sanctions era.

"International oil majors have welcomed the new format of Iran's contracts," ministry spokesman Mehdi Hosseini told the official IRNA news agency, citing European, Russian and Chinese firms.

"They are awaiting the results of Iran's nuclear talks and the removal of sanctions," he added.

But with crude prices hovering around a lowly $60 a barrel as the market experiences a supply glut, the chances of an economic windfall for Iran or international companies is difficult to gauge.

While oil and gas was long the cornerstone of Iran's finances, the global fall in crude prices has led President Hassan Rouhani's government to seek a more varied economy.

And in the budget for this year Iran halved its reliance on oil income to 25 percent. Foreign companies are also weighing the cost of doing business in Iran against the potential returns.

According to the oil ministry, 29 foreign countries including Britain, China, France, Germany, Russia, Singapore and the United Arab Emirates -- will have delegates at the Tehran exhibition.

Some 1,200 Iranian companies and 600 international businesses have registered, but no representatives from the US or Saudi Arabia will attend, according to the oil ministry.

Under Iranian law, foreign companies in the oil and gas sector must partner with local firms.

The development of oil and gas sites, including the massive South Pars gas field, shared with Qatar, and the West Karoun oilfield, offer significant potential for foreign tie-ups.

Rouhani has also spoken favourably about foreign investment in Iran should there be a nuclear agreement.

Having agreed an outline framework for a deal on April 2, Iran and the P5+1 powers (Britain, China, France, Russia and the United States plus Germany) aim to conclude a final accord by the end of June.

Under an interim deal that came into effect in January 2014, which gave some sanctions relief, Iran has been allowed to maintain its crude oil exports at around 1.2 million barrels per day -- less than half of what it was shipping in late 2011.

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