Two years after Iran pledged to open up its oil industry in anticipation of the lifting of sanctions, foreign companies say they still have little information about Iranian oil fields and contract terms, hindering investment decisions.
Bosses from oil majors including BP, Total, Eni, Royal Dutch Shell and LUKOIL have all travelled to Tehran this year, since the EU sanctions ended in January. Their teams spent weeks meeting local officials ahead of investment tenders due to start next month.
But several senior executives and members of their negotiating teams told Reuters they still had not been given sufficient information about the geology of Iranian fields or contract terms. The people, who were not speaking from Iran, said they were also unclear about how quickly they would be able to recoup their investment and who they could partner with locally.
While foreign companies are eager to enter Iran, which sits on a tenth of the world’s oil reserves, they are also wary of any contract terms that may lead to them falling foul of remaining U.S. sanctions.
BP Chief Executive Bob Dudley, whose company is seeking deals to develop several fields, said he did not know the details of any potential contracts yet.
“Iran is a large oil and gas province … but we don’t have any specific contracts right now,” Dudley said last week. “We’re going to have to be very careful. We don’t want to violate any sanction,” he added.
If this lack of clarity leads to companies withholding investment in the tenders or investing elsewhere, it could undermine the plans of Iran’s reformist President Hassan Rouhani to attract up to $185 billion from oil majors into 50 projects and increase Iranian output to 5-6 million barrels per day (bpd) from less than 4 million now.
This could deprive the country of much-needed income as it seeks to recover from years of sanctions which hammered its economy.
The competition for foreign investment between oil-producing nations has intensified over the past five years due to abundant discoveries of new energy reserves in countries such as Brazil and the United States.
Political infighting in Tehran has clouded the outlook for Iran’s energy sector. Hardline rivals of Rouhani have strongly opposed giving overseas firms control of oil fields, saying this contradicts the constitution which states that natural resource reserves cannot be owned by foreigners. The government says its opponents are impeding an economic recovery.
Some oil executives looking to invest in Iran said they were also unclear about whether deals would require parliamentary approval, a concern in a country with a complex and opaque system of clerical and republican rule where power is wielded by both elected and unelected officials.
With presidential elections due in May, there has been growing opposition to Rouhani and his allies this year from hardliners close to Supreme Leader Ayatollah Ali Khamenei and the Revolutionary Guards, Iran’s politically powerful elite military force.
Tensions between the two camps have sporadically spilled into the open, including a speech from Vice President Eshaq Jahangiri denouncing the government’s critics at a major oil industry conference in Tehran this week.
“You see how some neighbours have developed in recent years. For example Iraq managed to bring its production above 4 million bpd. We should not let the country lag behind because of irresponsible people,” he told senior Iranian oil officials and representatives of oil majors.