Iran Oil Sector Potential Not Fully Exploited

EghtesadOnline: The oil industry has been a driving force for local upstream and downstream companies including private enterprise working for or related to oil in some form or fashion.

News ID: ۷۴۸۶۶۶

09 October 2019

Oil Minister Bijan Namdar Zanganeh made this statement Tuesday on the sidelines of the 5th Iranian Petroleum and Energy Club Congress and Exhibition (IPEC 2019) in Tehran, ILNA reported.

"Although this key sector has undergone major global changes over the past decade; for example, the US has emerged as a major crude and oil derivatives' exporter, there is still enormous potential for expanding the oil industry in Iran," Zanganeh said.

Procrastination in developing the sector will have grave consequences as other domestically-oil dependent industries will go bankrupt gradually, Financial Tribune quoted him as saying.

Referring to protests in Azarab factory in the city of Arak, western Iran, he said discontent in manufacturing units stems from the slow pace of development in oil and petrochemical projects.

Employees of the Azarab factory held a protest gathering on October 7 for not receiving their wages. The factory with more than 2,000 workers specializes in making oil and thermal plant steam boilers, vessels and heat exchangers in petrochemical plants.

"So long as oil exploration, extraction, refining and transportation continue, other oil-related industries like engineering and technical services will not be affected."

Zanganeh went on to say that in the past (before the new US sanctions were announced in 2018), most projects were implemented with help from the National Development Fund of Iran, Iran’s sovereign wealth fund. Conditions have changed and "we no more can rely on the fund. We need new strategies to attract investment, one of which is the capital market".

Widening Deficit

“The government is struggling to cover its ballooning budget deficit and cannot spend for new development projects," he added, noting that his ministry is working hard to create the conditions for an active presence of the private sector in the oil industry.

"We have created new revenue channels by selling gasoline and diesel in the Iran Energy Exchange. But this not enough and much more needs to be done for completing ongoing projects," he said.

Selling gasoline via the Iran Energy Exchange on average generates $200 million a week, Ali Hosseini, the managing director of IRENEX, said last week.

Criticizing small and medium-sized firms, the minister complained that the SMEs are generally not eligible for quality work and cannot collaborate effectively.  “After a project is completed the infighting starts and they try to sue each other for a variety of reasons.”

Undertaking oil projects demands large amounts of capital, skills and foresight, he recalled. “Small companies will never succeed in this sphere no matter how strong they are technically.”

No Rationing

In related news, the minister said so far no decision has been taken for raising gasoline prices or rationing fuel and that the Majlis is against such moves. But to compel car and motorcycle owners to use their own fuel card instead of those belonging to gasoline station, the National Iranian Oil Refining and Distribution Company has announced a new limit.

"The previous 30-liter maximum purchase at the pumps has been cut to 20 liters [as of Tuesday] and will soon be reduced further.”

Average international price of gasoline is $1 per liter, whereas, but it is sold at 9 cents a liter in Iran. The fuel is sold at 84 cents, $1.4, $1.5 and $1.18 in Lebanon, India, China and Turkey respectively.

IPEC 2019, October 8-9, is one of the largest events of its kind in the Middle East. It explores key subjects related to the oil and gas industry. IPEC’s stated goal is to focus on the needs and priorities of the oil industry. It brings together domestic associations and international energy experts.