Iran Optimistic, But Big Oil is Shy
12 Juillet 2017 - 06:20PM
Dow Jones News
By Benoit Faucon
ISTANBUL -- Iran's ambitious agenda for its oil-and-gas industry
is running up against the caution of big energy companies.
At a major energy conference here, Iranian officials said French
oil giant Total SA's commitment of $1 billion toward a gas project
this month marked a new chapter in the country's energy business
since the end of Western sanctions. Iranian officials promised 10
contracts like it in the next year and said they were seeking $92
billion in foreign investment to raise oil production by a third
and gas exports by 15-fold by 2021.
"Our hands are full," Iran's Deputy Oil Minister Amir Hossein
Zamaninia told reporters here at the World Petroleum Congress,
saying 25 contracts were being negotiated with foreign companies.
"We think that the situation is normal enough now for major
international oil business to get engaged in Iran."
But other big oil companies have been more shy than Total about
wading into Iran, even with its enormous oil and gas reserves.
Western companies are wary of running afoul of remaining U.S.
sanctions on Iran for weapons, human rights and terrorism
allegations. Overall, the industry is still smarting from an
oil-price downturn that isn't letting up in its third year, making
companies wary of new spending.
Speaking at the same conference here, BP PLC Chief Executive Bob
Dudley said he was looking beyond Iran for now, as the company had
already committed to $15 billion in spending elsewhere this
year.
"We have a full plate," Mr. Dudley said at a news briefing. "We
have to stay on a capital diet."
U.S. companies like Exxon Mobil Corp. and Chevron Corp. are
barred from doing business in Iran, but European companies like
London-based BP can still try to make a deal work. One factor
slowing things down: U.S. President Donald Trump has criticized the
deal over Iran's nuclear program and threatened to pull out or
tighten sanctions.
"BP's decision to be cautious on Iran [was] a ripple effect" of
U.S. pressure against doing business in Iran, Mr. Zamaninia
said.
A BP spokesman declined to comment.
Total's commitment in Iran is evidence that oil companies have
concluded "the return of sanctions is very unlikely, if not
impossible," Mr. Zamaninia said. Total said it was in compliance
with all sanctions.
Mr. Zamaninia has tried to use the World Petroleum Congress
conference here as a sort of coming out party for Iranian energy
investments after the Total deal. He cracked jokes while sharing a
panel with Mr. Dudley and Barry Worthington, the executive director
of the U.S. Energy Association, an industry body that advocates for
American oil companies.
But the panel also underscored Iran's challenges. While Messrs.
Dudley and Zamaninia talked before the panel, Mr. Dudley said they
only discussed its topics -- not any potential business. Mr.
Dudley, a U.S. citizen, didn't elaborate but Washington's sanctions
bar Americans from discussing oil deals with Iran.
Mr. Dudley called Total's deal a "very good sign for the
industry" but he hadn't seen its terms. Total and Iranian officials
have said the 20-year contract was longer-term than deals Iran
allowed in the past and allowed the company more flexibility to
recoup costs.
Total Chief Executive Patrick Pouyanne said the company and its
partners were already preparing tenders to contractors in the
project. Total's partners include China National Petroleum Corp.
and an Iranian company.
Royal Dutch Shell PLC signed a preliminary agreement to explore
opportunities in Iranian oil fields late last year. The Anglo-Dutch
company held meetings in Tehran and Dubai in the two past months
with the National Iranian Oil Co. and Chinese state-run China
Petroleum & Chemical Corp. to work together on an oil field
called Yadavaran, according to a person familiar with the
discussions. But people who work with the company said it is
concerned about its exposure to the U.S. and is more selective in
the choice of its banks than Total.
A Shell spokeswoman said: "Shell is interested in exploring the
role it can play in developing Iran's energy potential. We have
been engaging with Iranian officials but it is still too early to
discuss potential Shell investment in any project."
Oil companies are closely watching a political debate playing
out in Iran since the Total deal. On Wednesday, Iranian Oil
Minister Bijan Zanganeh was grilled in the country's parliament
over what some hard-liners said was a sweet deal for Total. Some
lawmakers threatened to block it, though they relented.
Iran is also working against a persistent chill in oil
investments globally. While global oil and gas investments are set
to increase by 3% this year, most of it is flowing to the U.S.
shale oil, according to the International Energy Agency, an adviser
to governments on energy issues.
Iran's old oil fields are a challenge, requiring "patience and
high technology," Laszlo Varro, the IEA's chief economist,
said.
Further, Iran's geopolitical risks, complex contracts and risk
of sanctions could deter investors who can go to other growing oil
regions like Brazil instead, Mr. Varro said. "Iran will remain
under its geological potential for quite some time," he said.
Write to Benoit Faucon at benoit.faucon@wsj.com
(END) Dow Jones Newswires
July 12, 2017 12:05 ET (16:05 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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