Political Discord Over IPC Will Hurt National Interest

EghtesadOnline: The shadow of political disputes hanging over the development of Iran's massive hydrocarbon deposits and its new model of oil contracts will seriously undermine national interests, the deputy oil minister for international affairs said.

News ID: ۷۴۲۴۴۵

02 July 2017

"Making concerted efforts to conclude long-term oil deals with multinationals under the new Iran Petroleum Contract framework is the best way to safeguard the country's interests in global markets," Amirhossein Zamaninia was also quoted as saying by IRNA on Saturday.

"It is our responsibility to assure foreign investors that Iran is a safe place for all those who want to play a role in expanding the country's oil and gas sector," he said, adding that the more political conflicts are created in the country, the less international energy majors will be willing to fund mega projects.

Attaching great importance to attracting foreign investments, Zamaninia said, "Internal disagreements over the new model of oil contracts will inflict irreversible losses on the country and hold back the process of transferring technical know-how and the much needed finance."

According to the official, what matters is winning the energy majors' trust to finance oil and gas initiatives at the earliest possible time and the type of contracts should be given lower priority.

According to Financial Tribune, Zamaninia said that whether agreements are IPC-based or not does not really matter because as long as investments are not attracted, new fields cannot be discovered, nor can the old ones be developed.

Energy experts, including Zamaninia, believe that Iran's oil and gas production levels are not proportional to its vast hydrocarbon reserves since the country has been deprived of cutting-edge oil recovery methods for a long time.

Moreover, all efforts to attract international investments have failed so far due to domestic procrastination.

Peak Consumption

Fossil fuel consumption will gradually lose steam after 20-25 years, Zamaninia said, urging all officials and stakeholders in the oil and gas sector to seize investment and production opportunities.

According to the official, due to climate change concerns as well as global warming issues, hydrocarbon fuels are forecast to gradually give way to renewable and emerging technologies for power generation.

Oil Minister Bijan Namdar Zanganeh said the IPC framework will help Iran accelerate its oil and gas production in cooperation with foreign companies.

Some experts say IPC is a revision of buyback model with a particular stress on boosting extraction from oilfields, with the most notable difference being the remuneration of contractors that depends on their performance and production.

IPC has been a subject of dispute among officials and experts. Opponents say it is essentially a concession of Iran’s rich hydrocarbon reserves to foreign companies, with one analyst saying the new contracts are “a return to days before the oil industry was nationalized”.

Nonetheless, advocates say the development of oil and gas fields requires foreign technology and investment, stressing that a lack of money and equipment justifies the Oil Ministry’s policy in reaching out to internationals.

Substantial Investment

According to a new assessment by Bloomberg New Energy Finance, wind and solar industries are set to attract substantially higher investments than fossil fuels over the next several decades. Between now and 2040, an estimated $7.8 trillion in investment will pour into the renewable energy industry, more than double the $3.2 trillion that Bloomberg expects to be invested into the coal, natural gas and oil industries.

More staggering is that individual renewable energy technologies will garner as much or more investment dollars than the entire fossil fuel industry. For example, onshore and offshore wind will see $3.1 trillion in investment, whereas rooftop and utility-scale solar projects alone will attract $3.4 trillion in investment, which amounts to more money than all the oil wells, natural gas wells and coal mines combined.