Oil majors keen on investment in Iran

On March 3 and 4, the panel discussed challenges of financing in Iran’s petroleum industry, absence of correct relationship between the NIOC and the Iranian government, global nature of financing challenges for the petroleum industry and the willingness of major oil companies to expand cooperation with Iran.

The “Investment and Financing; Fiscal Regime in Upstream Projects” panel was attended by Mohammad Mostafavi, director of investment and business at the National Iranian Oil Company (NIOC), Payman Molavi, advisor for finance and investment, Ali-Reza Saeedi Sarkhanlou, vice-president of National Development Fund of Iran (NDFI) for foreign investment, Sadeq Shirazi, corporate finance manager at Dana Energy, and James Fierro, CEO and Chairman of ECO Capacity Exchange.

Mostafavi referred to obstacles and challenges to financing in the petroleum industry, noting that the NIOC’s meager share of revenue and value-added which it creates for the country was one of major challenges. He said that engineering, procurement and construction (EPC) and the newly-developed Iran Petroleum Contract (IPC) would be applied to the development of upstream oil projects. “In the implementation of oil production and preservation projects within the EPC framework, various methods of financing including project fund are used,” said Mostafavi.

Financing Challenge Grips Oil Industry
Fierro said a major financing challenge was companies’ lack of full knowledge about potentialities. “That creates restrictions for the companies. Therefore, by becoming aware of these challenges we can find solutions to financing,” he said.

“The financing challenge in the petroleum industry is not limited to Iran because due to the problems of fiscal system many companies involved in oil and gas industries are faced with the same challenge,” he added.

Fierro said, “However, international majors are willing to cooperate with Iran in implementing oil and gas projects, and are looking for solutions to expand cooperation in this sector.”

Enhanced Ties with Foreign Brokers

Molavi elucidated challenges lying ahead on the way of financing in the petroleum industry, saying more than $ 800,000 billion had been invested in oil and gas exploration and production in 2016. “It is pity to see Iran have no share of such big market,” he said.

Molavi said an improvement in Iran’s ranking would be key to attracting foreign investment. “As long as this ranking has not improved, foreign financing will be tough, cumbersome and costly,” he added. Echoing Fierro’s remarks about the fact that financing challenges are not limited to Iran, he said, “Oil, gas and petrochemical industry in the world is facing challenges due to the growth of renewable and other sources of energy.”

He said that small and medium-sized E&P companies were using creative methods to finance their projects. He said they often get access to financing tools through capital market. Molavi called on Iranian E&P companies to set up platforms outside the country and adopt proper strategies.

“In order to become successful at the international level, domestic companies are required to upgrade their ties with foreign brokers,” he said.

For his part, Saeedi Sarkhanlou referred to the constitution of the NDFI, saying, “These resources should be kept to serve future generations and we cannot spend them fully on oil; however, we can earmark the bulk of our resources to oil and gas projects.” He said the NDFI was not established to be a profitable fund, adding, “The petroleum industry is expected to move towards adopting various methods of financing, because it has to attract $ 200 billion in upstream and downstream sectors by the end of the 6th national development plan.”

Source: Iran Petroleum

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