Iran hold much opportunity but as much delays

Jan 15, 1999 01:00 AM

The drive for foreign energy investment has become stuck in wider reforms that may delay some major deals for months or years, oil executives say.
Iranian negotiators running the biggest oil tender since the 1979 revolution have found themselves in economic changes driven by shifting political forces.
One victim could be a campaign to land one or two morale-boosting showpiece agreements with Western majors by the end of the Iranian year on March 20.
Experts at state-owned National Iranian Oil Company (NIOC) want at least one big deal by then to lend new momentum to flagging efforts to seal more than 40 such ventures.
Some analysts say the March 20 goal may slip because of complications from major structural reforms implemented simultaneously in almost every corner of Iranian energy.

"My impression is NIOC could have got much further had they been given greater independence," said an international oil official.
"While NIOC's technical day-to-day decisions are driven by the forces within the oil sector, the larger issues, and especially those of a political and legal nature, are in the hands of the top leadership," said a local source.
One roadblock could be a planned decentralising of NIOC and creation of a string of semi-private affiliate companies to partner foreign firms involved in oil and gas openings.
"This enormous and highly centralised company needs to restructure to cope with new tasks," it said. "It is inevitably a painful process with ups and downs, winners and losers, and consequent tensions."
It said a division of NIOC into five separate entities plus a reshuffle of refining operations could create "problems and ambiguities for months to come."
The openings themselves -- more than 40 ventures worth $ 8 bn -- are designed to obtain Western technology to help exploration and enhanced recovery and revive ageing fields.
The broad aim is to boost the role of gas to meet growing domestic demand, release oil for export and raise gas output for reinjection into oilfields, export and petrochemical use.

As well as reinventing its structure and managing the oil opening, NIOC is also plans new pipelines to promote Iran as an export route for Caspian oil and privatise oil refineries and gas plants in line with wider economic liberalisation.
All this is being done amid low oil prices, recession in Iran's key Asian markets, simmering conservative opposition to foreign economic involvement and soaring refined product demand driven by a rapidly-growing population.
And that's not counting the effect of US sanctions and shortage of some skilled staff.

Most if not all bids submitted in response to the July 1998 tender launch are still in financial and technical evaluation with negotiation yet to come.
In those talks investors will express doubts about aspects of the buy-back investment model that repays foreign partners from production. Foreign investors argue it distorts commercial incentives to the detriment of both parties.

Some cheer will come from ratification shortly of two ventures outside the latest tender round.
One is an offshore project at Doroud oilfield due to go to France's Elf Aquitaine and Italy's ENI , originally offered in the 1995 tender.
The other is the offshore Balal oilfield development secured by Canadian Bow Valley and Premier Oil of Britain, also offered in 1995.
But the time these deals have taken are a gloomy indication of the delays in store in the current round.

Insiders cite as possible awards the development of the 5.5 bn barrel-plus Ahwaz Bangestan onshore oil complex.
This has attracted bids from Elf, Total , ENI, Shell, Lasmo and Arco.
Another is the Darkhovin onshore development bid by Lasmo, Petronas of Malaysia, Arco, BG and ENI.

Source: not available
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