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Iran eyes $185 billion oil and gas projects after sanctions

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Iran on Thursday outlined plans to rebuild its main industries and trade relationships following a nuclear agreement with world powers, saying it was targeting oil and gas projects worth $185 billion by 2020.

Iran’s Minister of Industry, Mines and Trade Mohammad Reza Nematzadeh said the Islamic Republic would focus on its oil and gas, metals and car industries with an eye to exporting to Europe after sanctions have been lifted, rather than simply importing Western technology.

“We are looking for a two-way trade as well as cooperation in development, design and engineering,” Nematzadeh told a conference in Vienna.

“We are no longer interested in a unidirectional importation of goods and machinery from Europe,” he said.

The United Nations Security Council on Monday endorsed a deal to end years of economic sanctions on Iran in return for curbs on its nuclear programme.

Sanctions are unlikely to be removed until next year, as the deal requires approval by the U.S. Congress. Nuclear inspectors must also confirm that Iran is complying with the deal. [ID:nL1N10231M]

While the Iranian and U.S. presidents have been promoting the accord, hardliners in Tehran and Washington have spoken out strongly against it.

Many European companies have already shown interest in reestablishing business in Iran, with Germany sending its economy minister Sigmar Gabriel on the first top level government visit to Tehran in 13 years together with a delegation of leading business figures. [ID:nL5N1001BN]

Iran’s deputy oil minister for commerce and international affairs, Hossein Zamaninia, said Tehran had identified nearly 50 oil and gas projects worth $185 billion that it hoped to sign by 2020. OPEC-member Iran has the world’s largest gas reserves and is fourth on the global list of top oil reserves holders.

NEW, LONGER CONTRACTS

In preparation for negotiations with possible foreign partners, Zamaninia said Iran had defined a new model contract which it calls its integrated petroleum contract (IPC).

“This model contract addresses some of the deficiencies of the old buyback contract and it further aligns the short- and long-term interests of parties involved,” he said.

He said the deals would last 20-25 years – much longer than the previously less popular buybacks, which effectively were fee paying deals with global oil majors such as France’s Total for services they performed on Iranian oil fields.

He said Iran would introduce the projects it has identified and the new contract model within 2-3 months.

Deputy Economy Minister Mohammad Khazaei said Iran had already completed negotiations with some European companies wanting to invest in the country.

“We are recently witnessing the return of European investors to the country. Some of these negotiations have concluded, and we have approved and granted them the foreign investment licences and protections,” Khazaei told the conference.

“Even in the past couple of weeks we have approved more than $2 billion of projects in Iran by European companies,” he said, without naming the firms or providing further details.

Most European oil majors and oil service companies have so far expressed caution about the prospects of a windfall of deals in Iran, saying their compliance departments will want to first see sanctions being fully removed before any meaningful work can start on projects.

Beyond oil, Nematzadeh said Iran was looking to move away from state ownership in many sectors, creating joint ventures for auto parts manufacturers with the aim to produce 3 million vehicles by 2025, of which a third would be exported.

Central bank deputy governor Akbar Komijani said Iran’s financial sector was offering opportunities for cooperation between domestic banks and foreign investors.

Nematzadeh said Iran aimed to join the World Trade Organization once political obstacles were removed and would be interested in trade deals with Europe and central Asian countries.

reuters.com



8 Comments on "Iran eyes $185 billion oil and gas projects after sanctions"

  1. Nony on Fri, 24th Jul 2015 2:17 pm 

    Wondered if our drilling professionals (short, Rock, doc, etc.) had any comments on the recent high IP well in the Utica. Very high flow for a short lateral well. But the well was very costly and technically difficult.

    http://oilpro.com/post/16827/utica-record-has-been-broken-highest-reported-ip-any-utica-well-t

    Is this the sort of thing where they can learn to handle the pressure and difficulties over time (and realize the high gas flow benefits) or will these technical issues be intractable and the resource untapped?

  2. apneaman on Fri, 24th Jul 2015 2:39 pm 

    A Look at the West Virginia University Assessment of Technically Recoverable Gas in the Utica Shale

    David Hughes

    http://www.postcarbon.org/a-look-at-the-west-virginia-university-assessment-of-technically-recoverable-gas-in-the-utica-shale/

  3. Nony on Fri, 24th Jul 2015 2:44 pm 

    Oh…crude is sticking it’s nose into the 47s. I think that is more of a temporary glut though. Happening on WTI more than Brent. And near term prices much more depressed than further out (high contango). Probably Saudis giving our shale-jahedeen a little price whipping by dumping product here. Imports are way up. [Consumers say, fight fight fight…we love it.]

  4. Nony on Fri, 24th Jul 2015 2:53 pm 

    Hughes has been very late to the party on the Utica if you look at his Drilling Deeper and such articles over the last 3 years. He either ignored it entirely or just mentioned it with a word or two and no numbers/analysis (do word search find in his articles). Meanwhile it has basically gone from zero to passing the Fayetteville in production. It’s not just “potential” any more, but delivering several percent of the countries gas.

  5. eugene on Fri, 24th Jul 2015 4:47 pm 

    While I understand your position of “zero to passing Fayetteville, I’ not sure what it means. Lots of things can supply a short term high but can’t handle the long haul. I’m not talking energy but proof of your position positive of gas. From a science based perspective, short term does not support a theory. We are in the land of unknowns here ie never been here before. We’re moving from a state inexpensive energy to one of ever increasing cost. I read all the hype about decreasing demand but a population increasing at the rate of 1.5 million a week leaves questions whether such efficiency increases will continue.

    So as is my nature, I keep coming back to between a runaway economy, climate change, energy problems, an ever increasing income inequity, etc. The situation we face is far more complex than just energy.

  6. BobInget on Fri, 24th Jul 2015 6:00 pm 

    http://www.nasdaq.com/aspx/call-transcript.aspx?StoryId=3352895&Title=core-laboratories-clb-ceo-david-demshur-on-q2-2015-results-earnings-call-transcript

    David Demshur – Chairman, President & CEO

    Chris, thank you. I would like to look at current market conditions. Core believes that worldwide crude oil supply and demand markets are well on their way to a balance at year-end, 2015. On the crude oil supply side, U.S. production peaked in April of this year.

    One only needs to look at Bakken production which peaked in December and Eagle Ford production which peaked earlier this year. With respective decline curve rates of 70%, 40% and 20%, for the first three years of production in these tight oil plays, significant in year-over-year declines will manifest themselves, as 2015 progresses and, into sharp declines if activity levels remain at constant levels into 2016.

    Ditto this analysis is for the Permian, Niobrara and all the liquids rich unconventional plays. From peak U.S. oil production numbers earlier this year of 9.5 million barrels, Core believes that U.S. production will decline over 500,000 barrels through year-end 2015, equating to a U.S. decline curve rate, on an annual basis, of 10.5 net. The highest of any major production area in the world.

    These activity levels persist in North America. North America will remain in decline, going into 2016, maybe dropping an additional 500,000 barrels of production. Moreover, internationally, Core does not believe the recent increases in production from the Middle East and Russia are sustainable over the long run. Decline curves in Russia will be greater than the 2.5% net, used by Core lab on a worldwide basis.

    Additional gains from Deepwater fields, on both South Atlantic margins in 2015 and 2016, will be muted, compared to those of 2013 and 2014. This was most recently highlighted by the downward guidance provided by Petrobras, of its pre-salt deepwater offshore fields. Therefore, by year-end, Core sees crude oil markets in balance, owing to production declines.

    Led by falls in the U.S. production stagnating to falling international production, while demand increases due to lower commodity prices, take hold. Worldwide, year-over-year demand increases of 1.3 million barrels a day, in the first half of 2015, are expected to increase by the IEA, year over year, to 1.4 million barrels, for all of 2015, balancing supply and demand by year-end 2015. Therefore, Core sees the V-shape recovery, led by higher commodity prices and followed by worldwide drilling activities, starting to increase in early 2016.

  7. BobInget on Fri, 24th Jul 2015 6:02 pm 

    By Gaurav Agnihotri
    Posted on Fri, 24 July 2015 20:56 | 0
    The undisputed king of oil and gas is making some moves that could change the face of the global refining sector.

    In June 2015, Saudi Arabia pumped a record 10.564 million barrels a day, a record level. As if being the world’s biggest exporter of oil was not enough, the desert kingdom is now looking to conquer the refining sector as it has quickly become the fourth largest refiner in the world. “Saudis have moved into the product business in a big way,” said Fereidun Fesharaki of FGE Energy. With Saudi Arabia’s refined fuel contributing to the global supply glut, what will be its impact on the refining markets especially those in Asia?

    How will Saudi Arabia Capture Market Share Downstream?

    A refinery’s success is measured by its ‘gross refining margins’. The gross refining margin is nothing but the difference between the value of the refined products and price of the crude oil. In case of Saudi Arabia, the price of crude oil would be extremely low. “The crude is so cheap it’s pretty much free for them, the margins are going to be massive. It makes trade flows in products very different,” said Amrita Sen of Energy Aspects.

    Related: Senate Sidesteps Key Issues In Latest Energy Bill

    There is little doubt then as to why the Saudis are shifting their focus to domestic refining. Along with acquiring a controlling stake in Korea’s S- Oil, the desert kingdom is commissioning a new refinery in Jizan which would have a capacity of around 400,000 barrels per day when it begins operations in 2017. Jizan will come on top of Saudi Arabia’s two other 400,000 bpd- refineries at Yasref and Yanbu, and will turn the country into a major global player in the downstream sector, expanding its campaign for market share beyond just crude oil.

    SaudiRefinedProducts

    Is Saudi Arabia likely to win a potential price war against Asian producers of diesel?

    By offering almost 2.8 million barrels of low-sulphur diesel to Asian and European markets, the Saudis are directly competing with Asian refiners, potentially sparking a price war. In fact, at $5.60 the Asian refining margins have fallen by almost 50 percent from June this year and are expected to drop by a further 30 percent.

    Related: How Energy Tech Can Meet Needs of Rapid Population Growth

    “We see refining margins weakening on worsening diesel fundamentals, particularly east of Suez, though gasoline should be supportive. A lot of diesel will be trapped in the Far East and this will lead to run cuts in places like Japan and South Korea as the arbitrage to the west will be closed by growing Middle Eastern supplies” said Robert Campbell of Energy Aspects.
    [BREAKING]: Trader who “Broke the Bank of England” grants first interview

    Since 1992 his secrets were locked away in his brain… but just recently he agreed to a private interview. It was all caught on camera… and what he has to say will change everything you think you know about trading. But you need to see it now… before it’s removed from the Internet again. View it (if it’s still available) now…

    View the interview here…
    On the other hand, it won’t be easy for Saudi Arabia – Chinese refiners are also producing more gasoline, for which demand is still strong. Moreover, Indian refiners are now moving away from Saudi Arabia which was previously India’s largest crude oil supplier. Indian refiners are now buying more crude oil from Nigeria, Iraq, Venezuela and Mexico. As a result, Saudi Arabia was forced to offer discounts on its heavy and sour grade of crude oil to its Asian customers.

    Still, Saudi Arabia can likely wait out the competition. Just as they have kept their crude oil production levels intact, it is possible that the Saudis will maintain their current refining output in spite of falling refining margins and eventually end up winning the price war against Asian producers.

    Related: What Miniature Nuclear Reactors Could Mean For The World

    However, one cannot easily neglect the Indian and Chinese refiners. Let us consider the case of Indian private refiners Essar and Reliance, which are among the most complex refineries in the world (refineries which are capable of processing heavier and cheaper crude). These two refineries have seen great success recently, following the recent dip in oil prices after a deal was reached between the P5+1 and Iran, and are likely to build upon their already impressive refining margins (Gross refining margin for Essar refinery was $9.04 per barrel while that of Reliance was $8.70 per barrel in first quarter of 2015).

    So, who will reap the benefits of the low prices?

    Given current market conditions, the Asian demand for diesel has reduced mainly due to the weakening Chinese market, while demand for gasoline is increasing in India, Pakistan, Thailand, the Philippines and Vietnam. The price for diesel is expected to fall, and gasoline prices will also continue to fall if there are no run cuts in the Asian refineries.

    This all translates into lower prices of refined fuels will eventually benefit Asian customers who will pay less for transportation, basic commodities and essential services.

    By Gaurav Agnihotri for Oilprice.com

  8. BobInget on Fri, 24th Jul 2015 6:05 pm 

    Press TV has conducted an interview with Seif Da’na, a professor at the University of Wisconsin from Chicago, to ask for his insight on the continuation of Saudi aggression against Yemen and the retaliatory attacks by the Yemeni people.

    The following is a rough transcription of the interview.

    Press TV: How do you feel this war on Yemen is going, especially because of course the retaliation only increases as well?

    Da’na: Well, we are in the fourth month, it’s been four months actually since the beginning of the aggression and Saudi Arabia and the coalition, Saudi Arabia and the United Arab Emirates particularly, achieved basically nothing except killing about five thousand people most of them are civilians, and creating a sever humanitarian crisis in Yemen. At this point, I mean, they started aggression with military airstrikes on Yemen and now we see part of the conflict actually is slipping into Saudi Arabia itself. That shows a total failure of the campaign, but at this point, what seems to be happening really is with these recent attacks on the Anad military air force base. They seem to be attempted to control the south, because this is one of the most important military bases actually in Yemen. Anybody looks just at the map, they will see that it’s the key the most southern district in Yemen. So, it seems to be like the battle for Aden now, but despite this, it’s a total failure. Reports from the ground actually say that part of the attack on the ground by Hadi’s militias, they have been joined by some members of al-Qaeda. Another interesting fact actually that we were informed about because until now they claim they control the Aden Airport and it seems they have controlled part of it, but it’s not functional, because the Ansarullah groups and the Yemeni military are about hundreds of meters away really. So, it cannot be functional. So, instead the Saudis and the Emiratis have been using the Boraiga Airport, which is another airport in the southern district in the southern part of Yemen, but again if people look at the map they will see that this airport is under the control of the al-Qaeda also. So, we have al-Qaeda participating actively at this point on the ground to support the … and the Saudi aerial attacks actually are providing the aerial cover for the al-Qaeda forces on the ground. This is very clear at this point.

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