Column: Iran is Its Own Worst Enemy For Oil Development

Column: Iran is Its Own Worst Enemy For Oil Development

Despite Iran’s efforts to re-enter the oil market, and amid promises two years ago by the country to open up the industry to foreign market after the sanctions against it were lifted, investors are still having difficulty making any real headway in the country.

Oil majors from around the globe have been to Iran to meet with local officials regarding upcoming tenders. Despite that, several representatives and their negotiating teams have said that they were still in the dark about the geology of the oil fields in Iran, and even on the terms of the contracts. They also did not know who their local partners would be, and how soon they would begin to recoup their investments in the Iranian fields.

Contract terms are important since investors do not want terms that could cause them to violate any remaining sanctions. Bob Dudley, the Chief Executive of BP commented, “Iran is a large oil and gas province … but we don’t have any specific contracts right now. “We’re going to have to be very careful. We don’t want to violate any sanction.”

Another issue that has hampered progress for companies that wish to do business in Iran is that of political infighting. Opponents of President Hassan Rouhani are opposed to foreign companies controlling oilfields on the grounds that such a move contradicts the Iranian constitution. The government in turn is accusing its opponents of stifling the nation’s recovery. Presidential elections are set for May, and Rouhani faces escalating opposition from followers of Ayatollah Ali Khamenei and the Revolutionary Guards.

Along with opposition, tension between the two sides is also on the upswing.

Yet another issue is the fact that the management at the National Iranian Oil Company has been reshuffled several times this year. Foreign companies have discovered that the team with which they have been working has been changed, and the moves have also resulted in contract delays.