International Oil Companies Seeking 'Higher Profits in the Iranian Market'

On Wednesday, November 20, Reuters reported that major oil companies are seeking better prices and more favorable terms in new contracts as they look to return to Iran following the lifting of sanctions. The New York-based magazine 'Foreign Affairs' also states in an article that the likelihood of a rapid return of major oil companies to Iran and the revival of the oil, gas, and petrochemical industries in the country is weak after sanctions are lifted. Reuters notes that oil companies are currently focusing on profitability due to the continued low prices of oil and gas, and the Islamic Republic must offer lucrative contracts with suitable conditions to attract them after sanctions are lifted. The Iranian government announced last September that it had prepared drafts of international oil and gas contracts aimed at attracting foreign investors and oil buyers, but has not yet disclosed the details. According to Reuters, the CEO of French company Total stated at a conference in Abu Dhabi that the issue is not about resources and opportunities, but about profitability. He emphasized that all these areas are contingent upon suitable contract conditions. The American magazine Foreign Affairs, in a detailed article by Mansour Kashfi, a university professor in Texas and fossil energy expert, expressed doubts about the rapid return of oil companies and foreign investors to Iran after sanctions are lifted. The Iranian government lacks the international prestige that would make oil companies interested in investing in a country that does not accept investment responsibility. Kashfi mentioned several reasons for this in his article and in an interview with Radio Farda, stating that the Iranian oil industry requires a significant amount of investment to increase production and profitability for investing companies. He noted that currently there is an abundance of oil in the world, and oil companies have significantly reduced their investments in various countries. According to the International Energy Agency, over $220 billion was cut from investments by major companies like BP and Royal Dutch Shell in 2015. Therefore, companies are very cautious about where to invest, showing no interest in investing billions in a place that may not yield returns for, say, fifteen years. Kashfi pointed out that all oil-producing countries are eager to attract foreign investors, from Iraq to Venezuela and Mexico, and added that the Iranian government lacks the international prestige to attract oil companies to invest in a country that does not accept investment responsibility. Reuters added that the Iranian Ministry of Oil stated that its new contracts would not only be much better than the so-called 'buy-back' contracts but also better than contracts signed by Iraq in 2009 and 2010 with European companies. However, the gas sector head of Dutch-British Royal Dutch Shell told Reuters that today buy-back contracts hold no appeal for anyone. Kashfi, residing in the U.S., also cited additional reasons for skepticism about the rapid entry of major European oil companies into the Iranian market. He mentioned internal issues in Iran, where some groups believe that if oil companies enter Iran, Western culture will re-enter the country. There is a struggle between President Hassan Rouhani's government and the leaders of the Revolutionary Guards, which is essentially the Khatam al-Anbia base. In the past three to four years, when oil companies exited Iran due to sanctions, their contracts were handed over to the Khatam al-Anbia base. Rouhani may be very eager for oil companies to enter Iran and open doors to the West, but currently, the Revolutionary Guards commanders oppose the entry of oil companies into Iran, except for second- or third-tier companies from East Asia and countries that lack experience in the oil industry. At the end of its report, Reuters mentioned Iran's oil exports, quoting officials from the Ministry of Oil who said that with the lifting of sanctions, they would be able to increase production and exports, which currently stands at just over one million barrels per day, by an additional 500,000 barrels daily. However, Kashfi described this figure as 'optimistic' in his article in Foreign Affairs, stating that under the best conditions, Iran's production and export increase could be 'a maximum of 300,000 barrels of crude oil per day,' which would only be possible 'in the second half of next year.'