Strengthening Local Enterprises Should Be NIOC Priority

EghtesadOnline: The National Iranian Oil Company needs a policy paradigm shift to develop oilfields, a member of Iran's Institute for International Energy Studies said.

News ID: ۷۸۳۰۰۳

20 June 2018

"The new model of oil contracts—the Iran Petroleum Contract—has not proven to be useful for the country as multinationals like Total are always afraid of US sanctions and do not honor their pledges," Gholamhossein Hassantash was also quoted as saying by ILNA.

According to the official, although NIOC sweetened the terms of its oil contracts, it was not able to attract oil giants as it was planned.

"NIOC should have made an attempt to strengthen domestic companies instead of insisting on signing deals with international firms, which will never put themselves in danger," Financial Tribune quoted him as saying.

"Prioritizing cooperation with local enterprises and joining hand with smaller-scale foreign partners can yield better results than trumpeting oil majors' presence in Iran's development ventures."

The expert further said that contrary to the common perception, domestic companies do not lag behind in technical know-how and their main concern is financial support to purchase their equipment.

Unfortunately, the domestic firms' lack of financial strength is the biggest reason behind their failure to undertake major energy projects. Hassantash noted that teaming up with small foreign firms to undertake small- and medium-sized oil and gas initiatives do not need massive investments and because such projects contribute much less to air pollution, international organizations usually provide them with financial resources.

"European Commissioner for Energy and Climate Miguel Arias Canete, who visited Tehran in May to discuss oil issues with Iranian officials, also highlighted the importance of collaborating with smaller-scale firms to minimize the effects of US reimposition of sanctions," he said.

Filling Shortfall

According to the expert, Saudis cannot fill Iranian oil shortfall in the short run as crude extracted from different oilfields has different chemical properties and refineries require time to adapt their machinery to the new crude. He added that despite western insistence on calling OPEC a cartel, the organization has never tried to monopolize the oil market.

"Oil prices have always been dependent on supply-demand balance," he said, adding that if some OPEC members open their taps, there is no mechanism to stop them.

Hassantash emphasized the Achilles' heel of the country's economy is its dependence on petrodollars, which helps the US and its allies take advantage of it to put Iran under severe economic pressure by limiting oil exports and "surprisingly there is no long-term plan to reform the economic structures".