Iran calls for increased foreign spending in oil sector

STAVANGER, NORWAY - Opec member Iran yesterday called for increased foreign spending in its oil and gas sector, in part blaming underinvestment in energy infrastructure for current record high oil prices.

By (Reuters)

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Published: Tue 24 Aug 2004, 10:55 AM

Last updated: Thu 2 Apr 2015, 11:46 AM

Iran’s Deputy Oil Minister Mohammad Hadi Nejad Hosseinian predicted oil prices would stay close to $50 a barrel in the short term as steep world demand and unrest in the Middle East drives prices higher.

“Most Opec producers have been unable to supply extra oil as a result of inadequate investment during the period when oil prices were weak,” said Hosseinian.

He called for for foreign cooperation to help Iran meet a target of producing 5.5 million barrels of oil per day and 700 million cubic metres of gas per day by 2010.

Iran currently produces around four million bpd. Projected investment costs would total $50 billion over the next six years.

“Iran expects to rely heavily on foreign investment to implement its ambitious plans,” Hosseinian said on the sidelines of an international oil conference in Stavanger, Norway.

Development of new Iranian fields is sluggish, weighed down by convoluted contracts that deter investors.

Under Iran’s ’buy-back’ contracts foreign companies develop a field for a short period and are compensated with output before the state oil company ’buys back’ the field.

Iran’s hardline lawmakers earlier this month vetoed parts of an economic reform plan that had aimed to lure foreign investment into the energy and banking sectors.

They voted against moves to privatise state-run banks and allow foreign branches to open in the Islamic Republic.

The parliamentarians also diluted an energy reform that would have allowed discoverers of oil to exploit their finds. The link will not be made automatic and successful exploration companies will have to enter a state-run tender.

Hosseinian particularly called for Norwegian investment, probably in the form of joint ventures, despite a scandal involving suspected bribery in Iran which led last year to the resignation of Statoil’s then chief executive and chairman.

“Regrettably, there was a dark side ... but valuable lessons should be learnt,” Hosseinian said.

He said scientific and technological as well as financial cooperation was required and should be low risk for any foreign investor.

“Any partnership with Iranian firms will involve very little risk because Norwegian companies will have a say in the implementation and cost of projects. Iranian companies will also be flexible,” Hosseinian said.

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