Iran to clients: Buy our oil and get joint ventures too

GS Holdings

16/09/2015 10:26

* Returning oil buyers to be offered joint ventures in Iran 
    * Iran to officially present new contracts in December 
    * Iran wants to avoid further price discounts 
    * But its post-sanctions exports would add to oil glut 
 
    By Meeyoung Cho 
    SEOUL, Sept 16 (Reuters) - Iran has unveiled details for 
long-awaited foreign cooperation contracts which it hopes will 
attract oil buyers and investors to modernise its ageing 
infrastructure, including offers to take part in joint ventures 
to extract its huge reserves. 
    The United Nations endorsed a deal in July to end years of 
economic sanctions on the Islamic republic over its nuclear 
programme, although a removal of those sanctions still requires 
U.S.-Congressional approval. 
    Iran, a member of the Organization of the Petroleum 
Exporting Countries (OPEC), has some of the world's biggest oil 
and gas reserves, and officials have identified around four 
dozen projects worth $185 billion it hopes to develop by 2020. 
 ID:nL5N103269  
    Pre-sanctions agreements between Iran and foreign energy 
firms offered partners oil and gas revenue payments in return 
for cash investment in so-called buyback contracts. But 
foreigners were barred from joint ventures or from extracting 
themselves, making these contracts unpopular with investors. 
    Iranian officials say that's about to change. 
    "Iran is going to apply a new version of oil contract model 
in order to make it more attractive for foreign investors, with 
similar terms to a PSA (production sharing agreement)," said 
Shahrouz Abolhosseini, petroleum products pricing manager at 
National Iranian Oil Company (NIOC), during a business meeting 
in the South Korean capital on Wednesday. 
    "NIOC ... aims to embark on joint ventures with foreign 
investors and international companies in the oil and gas 
industry," he added. 
    Also in Seoul, Ali A. Arshi, adviser to the deputy minister 
for international affairs and commerce at Iran's Ministry of 
Petroleum, said the main advantage of the new contracts over the 
previous buybacks would be more contractual flexibility. He did 
not elaborate. 
    Iran's oil ministry said in August it would officially 
present the new contracts at a conference in London in December. 
 ID:nL5N1160VV  
     
    ATTRACTING BUYERS 
    Tehran's move is a latest attempt to attract buyers beyond 
offering outright oil discounts, which have included offers of 
extended credit and free cost of shipping. 
    "What we can expect from Iran is being creative in the sense 
that when they approach potential clients they will tie the sale 
of Iranian crude or Iranian (refined) products to future 
collaboration," said Bijan Khajehpour, managing partner at Atieh 
International, which advises companies on investing in Iran. 
    Khajehpour said there were discussions to favour returning 
oil buyers with direct investment or joint venture opportunities 
in Iran. 
    Last month, Woo Tae-hee, South Korea's deputy trade 
minister, was part of a delegation to Iran seeking energy and 
construction deals, and said Seoul would consider increasing its 
oil imports from Iran once sanctions are lifted.  ID:nL4N1161KZ  
    Iran exported almost 3 million barrels per day (bpd) of 
crude at its peak before Western sanctions over its alleged 
ambitions to build a nuclear bomb saw shipments collapse to 
about 1 million bpd over the last 2-1/2 years. 
    Tehran hopes to add 500,000 bpd to production within two 
months of easing sanctions, and as much as 1 million bpd in 6-7 
months. 
    Many sellers, especially within OPEC - which has ruled out 
production cuts to defend market share rather than ensure higher 
prices - have heavily discounted their oil to attract buyers, 
who can increasingly pick the best offers as there is more oil 
on offer than needed. 
    Tehran reduced the price of its flagship crude to the lowest 
in three years this week, but Iranian officials have ruled out 
further discounts, for now.  ID:nL4N11K241  
    It "is not our policy to make (more) discounts," said Arshi. 
 
 (Reporting by Meeyoung Cho; Editing by Henning Gloystein and 
Ian Geoghegan) 
 ((meeyoung.cho@thomsonreuters.com; +82 2 3704 5653; Reuters 
Messaging: meeyoung.cho.reuters.com@reuters.net)) 
 
Keywords: IRAN OIL/CONTRACTS