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Iran Economy Update
Issue 53/2017 SUNDAY MAY 7TH
22nd International Oil Show inaugurated in Tehran
Parliament Speaker assures foreign firms that developing oil fields is the policy of the Islamic Republic establishment that cannot be avoided by any govt.
...Zangeneh says JCPOA was vital for continuing Iran oil exports
Iran International Oil, Gas, Refining & Petrochemical Exhibition started on May 6, and will run until May 9th. According to Shana, the petroleum ministry’s news agency, along with the 2,500 Iranian companies, representatives from 1,500 companies from 37 foreign companies have also participated in the exhibition. At this exhibition, the German, French, Italian, Korean Russian, Japanese, Dutch, Australian, Spanish and Turkish companies are present in the form of pavilion participation. Petroleum Minister Bijan Zangeneh and Parliament Speaker Ali Larijani were the two senior officials who inaugurated the event on Saturday morning. This year, Russian Gazprom withdrew from participation and Total, Shell and BP said they won’t have pavilion participation but will send their expert representatives to evaluate the status of the participating companies.
Speaking at the inauguration ceremony, Parliament Speaker Ali Larijani, who is a supporter o Rouhani’s reelection, emphasized on the necessity of increasing the recovery factor of oil field as well as giving priority to developing the shared fields.
“Modern technologies must be applied” he said, adding that “the vision the Petroleum ministry has had in recent years is a right vision and the Majles will certainly support it.” Larijani emphasized that “Today, Iran enjoys good and acceptable stability.” He implicitly assured the participating foreign firms that the general energy policies are formulated by the Islamic Republic establishment [not governments] that cannot be changed by a government.
“Currently, Iran’s conditions for investment in the petroleum sector are good from different aspects including the security the country enjoys and the support the different domestic power sectors throw behind.” “We strongly insist that proper investment should be made in the oil and gas fields as an important priority. The priority should be on increasing the capacity and preventing the waste of such capacities,” said Larijani, according to Eghtesad Online website. “This issue is important for the sake of our national interests and there should be no dispute [among the presidential candidates] on the issue of giving priority to developing the shared oil fields because it is among the general policies of the Islamic Republic establishment that has already been stipulated in the 6th Development Plan,” he said. Larijani’s speech was an allude to the remarks of some of the conservative presidential candidates who’ve challenged the Rouhani government’s oil and gas sector policies especially in giving priority to developing the fields shared with the neighbors.
As another speaker to the inauguration ceremony, Petroleum Minister Bijan Zangeneh said that in spite of the ruins left by the previous administrations as well as the downward movement of oil prices and substantial financial shortfalls, this government accomplished several achievements in the petroleum industry including the inauguration of ten phases of the South Pars in 3.5 years, achieving a two-fold enhancement in gas production from the South Pars field and increasing the volume to 575 million cm/d, turning Iran from an importer of gas oil into an exporter, exporting 50 million liters of fuel oil, and increasing petrochemical
2 developing shared fields
and increasing recovery rates are MoP’s top priorities
NIOC MD says five more phases of South Pars to come online by end of this year
Iran to export 40k bpd of oil to OMV to settle debt over Band-e Karkheh field development
latest figures on Iran’s oil production and exports
NIOC denies offering huge discounts on oil
production by 9 million tonnes annually. Zangeneh said Iran’s production and exports of crude oil increased by more than one million bpd post-sanctions and boasted that the ministry managed to recapture the lost oil market share.
Zangeneh ensured that “Today, Iran doesn’t have any problem in marketing and selling it oil. “If the JCPOA hadn’t been made, today, Iran wouldn’t have any oil exports,” he added.
Zangeneh also expressed hope that the agreement reached by the OPEC members last November to cut production and boost prices will continue.
“Currently, the signals we are receiving from the oil producers indicate that all are willing to agree on continuing the supply cuts. I think the non-OPEC producers are similarly willing to cooperate.”
Similar to Parliament Speaker Ali Larijani, Zangeneh talked about the Petroleum ministry’s priories in the oil and gas sectors saying the first priority is developing the fields shared with neighbors as well as increasing the recovery rate of all fields.” Zangeneh denied the assertion of those [hardline] opponents who argue that oil contracts imply the coutnry’s reliance on foreigners, saying “our most emphasize in such contracts are utilizing the domestic capacities.”
NIOC Managing Director Ali Kardor said in a press conference at the exhibition that with the recent inauguration of five phases of South Pars, Iran’s extraction of natural gas from the shared South Pars field equaled that of Qatar. He expressed hope that the remained phases of the field, which includes phases 13,14, 22, 23 and 24, will come online in the second half of 1396 or early 1397. “After finishing the remained phases of the field, we will start the second stage of improvement of these 29 phases of South Pars field, which will require $30 billion in investment [to prevent production decline],” added Kardor. On the damages inflicted by sanctions, Kardor expressed regret that they caused the South Pars gas projects to cost 2.5 times higher than normal. He also said that under sanctions, Iran had stored 75 million barrels of condensates on floating tankers and added that storing a single barrel of condensates costs $12, which with the finalization of the nuclear deal, all the condensates were sold and the government got rid of this burden.
Kardor also said Iran will sell 40,000 bpd of oil to Austrian OMV, and explained that part of this oil sale is to repay the debt Iran owes to this European company for undertaking development of Band-e Karkheh oil field some years ago. 7.25% of the oil sale money to this Austrian company will be spent on settling this debt and 92.75 percent will be deposited in the country’s treasury, said Kardor.
Kardor said that Iran’s oil production level will be fixed at 4 million bpd in three months. He reiterated Zangeneh’s proclamation that if the nuclear deal hadn’t been made, the country’s oil export volume would have reached just 450,000 bpd today. He said in the Persian months of Farvardin (21 March – 20 April), Iran’s crude oil exports amounted to 2.5 million bpd and said the coutnry’s average crude oil exports is expected to reach 2.7 million bpd this year. In the Persian months of Esfand (19 Feb – 20 March), Iran’s export of crude oil and condensates together reached 3.047 million bpd which was a historic record high.
The NIOC managing director rejected the claims that Iran offers the huge discount of $7 a barrel to sell oil to crude dealers and confined himself to saying “Iran’s oil
3 supplies
Iran says money India owes to Iran is for oil imports under sanctions
pricing is based on market conditions and this does not imply the country offers discount or sell the crude at the below-market rates.”
The NIOC managing director said that for developing oil and gas fields, Iran has so far received seven proposals namely from Indonesian Pertamina, Chinese CNPC, Japanese Inpex, France Total, and Russian ZarubezhNeft, and added that hopefully, negotiations with Total will be finalized by this weekend. He said however that NIOC is not interested in signing the contracts during the presidential campaign.
Kardor admitted that Iran is still owed money from India for oil supplies to this Asian country under sanctions and that “serious talks” are going on “but we’ve still not reached final result on the figures.” He ensured that in the post-sanctions era, Iran is receiving its oil sale money regularly and with a payment window of 60-90 days. Meanwhile, an informed source within the Petroleum ministry has emphasized that India has completely paid the oil money it has imported from Iran post-sanctions and that the debt it owes to Iran is for the sanctions era. In a related development, Petroleum minister’s deputy for international affairs Amir-Hossein Zamani-Nia rejected the claim of some of conservative presidential candidates who argue that the country still faces problem in receiving oil export money. “Since the implementation of the nuclear deal, Iran does not have any problem in receiving money from oil exports and the issues [conservative candidates] raised in this regard are fundamentally baseless,” ISNA quoted Zamani-Nia as saying.
Iran cancels MoU with French Bouygues on IKIA project for missing deadline
The French company has reportedly failed to receive financial backing from int’l banks
Hossein Tajik, the investment & economic deputy of Imam Khomeini Airport (IKIA) City Company explained the reasons for which Iran canceled an agreement with French Bouygues to develop this airport. In an interview with Mehr news agency on Saturday, Tajik said according to an agreement signed between the Imam Khomeini Airport City Company and Bouygues and Aeroports de Paris (ADP.PA), the French company was supposed conduct seven steps in finalizing the pricing and technical mechanisms but it failed to do so in due time and hence, last September, we told them the deadline is due and we are not going to extend that.
Press TV reported on Saturday that the French company had signed a MoU in Jan 2016 to build and operate a terminal at the Imam Khomeini International Airport (IKIA) to handle 20 million passengers yearly but the preliminary agreement has been canceled by Iran. Press TV quoted Managing Director of IKIA Airport City Company Mahmoud Navidi as saying that Bouygues had “failed to fulfill its commitments under the agreement.” He explained that Bouygues was supposed to carry out the seven articles of the MoU in financial and technical aspects in four months and submit its documents to the Iranian part but missed the deadline.
According to Press TV, about four months ago and in an official letter, Iran had informed the French company about the cancelation of the agreement.
On Friday, Bouygues spokesman Mathieu Carre said the MoU “is now void but there are still ongoing discussions with Iranian authorities.” The French company has reportedly failed to receive financial backing from international banks to implement this $2.8 billion worth project. Reuters has quoted online newspaper La Lettre de l'Expansion as reporting that the project was hindered by the company's struggle to get financial backing from international banks, which are still wary of U.S. sanctions over their activities in Iran.
4 Iran has already signed
another agreement with another French compnay to develop the Mashhad airport
...but an Iranian Road ministry official rejects claims that the
cancelation was due to banking problems
Of note, Iran has already signed agreement with another French company to develop its airports. On Feb 5, the Financial Tribune English-Language newspaper wrote that French Construction Company Vinci SA has agreed to develop the Mashhad International Airport after representatives of the company visited the airport (also known as Shahid Hashemi Nejad Airport) and held talks with its officials. The MoU for developing the airport was signed on the sidelines of a business forum held in Tehran in late Jany, participated by French Foreign Minister Jean-Marc Ayrault who led a 100-strong delegation.
However, the vice minister of Road & Urban Development has rejected the assertions that banking problems have been the reason for the agreement’s cancellation. According to ILNA, Asghar Fakhrieh-Kashan told ILNA on Saturday that the agreement was canceled three months ago by the Iranian side, and “if we had agreed the French proposal for investment, the financial and banking issues would have raised one year later and hence, at this stage, the cancelation of the MoU has nothing to do with banking issues.” Fakhrieh-Kashan said the Bouygues was supposed to deliver the result of its studies and plans to the Dutch NACO Airport Consultancy & Engineering but the French company failed to submit the documents in due time and hence the agreement was canceled by the Iranian ministry of Road & Urban Development. Since the cancelation time, said Fakhrieh- Kashan, the Dutch consulting company has issued call for tender after which tens of foreign companies have participated and soon, a company will be singled out.
MEDEF and IDRO ink agreement on
facilitating project finance and technology transfer
Representatives of French Movement of Enterprises of France (MEDEF) visited Iran and inked an agreement on Saturday with the Industrial Development &
Renovation Organization of Iran (IDRO) on financing projects and transferring technologies in transport, energy and high-tech industries, the daily Donyay-e Eghtesad wrote on Sunday. IDRO President Mansour Moazzami explained that based on this agreement, MEDEF will help IDRO in finance and technology transfer, investment, investment insurance, and large-scale projects. Based on this agreement, on project finance MEDEF will introduce Iranian projects to the potential investors to attract investment. Also the agreement eyes transferring of technology in auto industry, railway lines, ships and helicopters as well as the transfer of technology for the renewable energy, oil, gas, petrochemical and water treatment sectors, added Moazzami.
Which countries have raised request for auto sector cooperation with Iran post-sanctions?
The IDRO deputy for developing industrial investment said that after the JCPOA implementation, several countries approached Iran including Italy, France, Germany, Korea and also some of northern European countries including Finland and Sweden. But generally speaking, Italy, France and Germany were the three countries that had the most frequent request to develop cooperation with Iran, added Fardad Daliri, according to ISNA. The Italians have approached Iran with raising the issue of steel & heavy industries, Germans raised the issue of technological/ software industries and the French firms have came forward on the issue of auto manufacturing, added Daliri. “My feeling is that the number of contracts in the automotive industry will be rising and this increase will continue, said Daliri.
