Deloitte: Foreign investment in Iran will take time

July 24, 2015

The imminent return of Iran to global oil could reshape global oil markets, but foreign investments will only return to the country in the 2020s, according to a new report by business consultancy Deloitte.

The firm says the historic agreement between Iran and the P5+1 countries earlier this month, which paves the way for lifting sanctions on Iran's oil business, is expected to see a fairly rapid increase in Iranian exports, starting early next year.

But, Deloitte says Iran will not need as much help as some perceive to ramp up production, with foreign investment returning to Iran, but not until the 2020s. 

Deloitte's report comes just a day after Iran's Minister of Petroleum Bijan Zangeneh said Iran would increase its oil recovery to 4.7 MMb/d "in the near future” and unveil its new Iran Petroleum Contract (IPC), aimed at attracting foreign investment into existing oilfields to increase output, in August.

Minister of Petroleum Bijan Zangeneh said: “Iran has the biggest hydrocarbon reserves in the world and deems itself responsible for the world’s energy security,” Zangeneh said, according to Iran's National Oil Company, which says sanctions sliced Iranian oil production by half. “Oil production is expected to reach 4.7 MMb/d in the near future,” he added. 

According to Deloitte, total Iranian crude oil production in 2016, on an annual average basis, will likely range from 3-3.7 MMb/d. The firm says, in 2011, the last full year before the sanctions on oil exports, Iranian crude oil production averaged about 3.7 MMb/d, with exports estimated at 2.2–2.3 MMb/d. For 2014, Iranian crude oil production averaged about 2.8 MMb/d and exports averaged close to 1 MMb/d (domestic crude oil refining accounted for the remainder of production).

"In the early to mid-1970s, prior to the Iranian revolution and the devastation of the Iran-Iraq war, Iran was able to produce 5.5–6 MMb/d, a level to which it never completely recovered," Deloitte says.

It adds: "Iran’s National Oil Company has a long history of successful development and operations. It has highly qualified and experienced engineers and managers, adequate technology, and the direct experience of working in Iran. Even if foreign investment arrives slowly, Iranian oil production has good prospects for a revival during the next decade.​"

However, Zangeneh has been in talks with German companies about taking part in Iran’s oil industry projects. According to NIOC, executives from Linde, an industrial gases and engineering company, and Siemens, along with representatives of other big German firms, were visiting Tehran.

Read more

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