Iran seeks to reassure oil investors

Iranian workers walk at a unit of South Pars Gas field in Asalouyeh Seaport, north of Persian Gulf, Iran November 19, 2015.
Raheb Homavandi | TIMA
Iranian workers walk at a unit of South Pars Gas field in Asalouyeh Seaport, north of Persian Gulf, Iran November 19, 2015.

Iran sought to reassure investors of its commitment to unveil new and improved oil contracts, downplaying domestic opposition to the return of international energy companies.

Mohammad Nahavandian, President Hassan Rouhani's chief of staff, told the Financial Times that the lifting of sanctions was a "win-win" situation for Iran and the west and that it wanted "constructive interaction" with the outside world. "We have to think about the future, and co-operation between the Iranian economy and the outside world would be beneficial to us all," he said.

Iran's oil ministry cancelled a long-awaited conference to publicise a new contract for international oil companies in London last month after it was attacked by Mr Rouhani's opponents as an attempt by international oil companies to loot Iran's natural resources.

Mr Nahavandian said that the Rouhani administration was working with its critics to resolve the issue. "The government has decided to go ahead with the expansion of the oil industry and foreign investment is required for this. We have revised the framework of the [oil] contracts," he told the FT.

He added: "It is not finalised yet; it is open for comments. You cannot call it opposition but there are differing opinions and the government would like to incorporate all these views."

Iran's growing financial services.
Iran's growing financial services.   

Mr Nahavandian also delivered a keynote speech at the FT Iran summit, making it clear that Iran was open for business. "We are making a positive environment," he said.

"We and the world can be backward-looking and fearful or forward-looking and realistic," he said, listing a number of sectors — from oil and gas, minerals, manufacturing and tourism — that offered opportunities for investors.

But hardline opposition to the opening of the economy cast a shadow over Mr Nahavandian's comments, with foreign oil executives in particular complaining that there was too much uncertainty for them to commit to investing in the country.

Iran is trying to increase its oil output and exports after sanctions crippled the energy sector and the economy.

Iran expects to add 500,000 b/d to its existing output in the coming months and 1m b/d in a year. Once the second-largest producer in Opec, Iran's oil output averaged 2.8m b/d in 2015, down from 3.6m b/d in 2011.

Seyed Hamid Hosseini, founder of Meraat International Group and member of the board of the Iranian Oil, Gas & Petrochemical Products Exporters' Union, said that, although Iran could grow production to reach it's pre-sanctions output capacity alone, it would need investment to expand further.

"We need contracts, tenders and technology," he said, describing Iran as a "garden" in need of nourishment. "Money for the Iranian economy is like water."

But the continued uncertainty leaves the international oil industry unwilling to enter the country.

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"Oil companies are negotiating in a vacuum. It's all theoretical at this stage," said Sue Millar, a sanctions lawyer at Stephenson Harwood. "They all know what they want but whether Iran can deliver contractually or politically is another matter. There are so many unanswered questions."

Many analysts hope the results ofIran's parliamentary elections last month will help ease the political challenges to Mr Rouhani's attempts to attract foreign investment. Centrist allies of the president have secured nearly half of the legislature.

Iran is aiming for economic growth of 8 per cent a year over the coming decade, Mr Nahavandian said, and much of this will be by fuelled by what he described as "constructive interaction" with the west.

"Iran has much to contribute to the world," Peyman Ghorbani Aghilabadi, vice-governor of economic affairs for the central bank, told the summit. "The opportunity for foreign investors is enormous."