re: Ann: Mehdiabad Project - Political Risk I...
Iran is courting western oil companies apparently. The 20% unemployment and 25% inflation, the lack of funds in the Oil Stabilisation Fund (they've spent a lot of it subsidising the poor, who of course are the people most likely to vote for Ahmadinejad) and finally the 4% to 8% annual decline in oil production should all mean Iran needs people like us to get Mehdiabad up and running. Recall: the majority of Govt. revenue comes from oil (not from income tax). Below is an article from the Daily Telegraph, which may be of interest.
Prickly oil-rich nation seeks submissive, wealthy multinational for lasting relationship
By Rowena Mason Energy Last updated: October 9th, 2009
This seems to be the gist of Iran’s attempt to woo foreign investors, after its deputy oil minister told reporters that it is apparently “ready” for a relationship with the private sector.
“Many companies that belong to the government now will become private very soon,” Azizollah Ramazani said yesterday at the World Gas Conference in Buenos Aires. “I think the Iranian energy sector is very interesting for foreign companies, including American companies.”
So why, when President Mahmoud Ahmadinejad is making threats about developing its nuclear power capabilities and accusing US spies of kidnapping an Iranian researcher in Saudi Arabia, is it also subtly wooing the oil money?
The truth is that Iran has gone out courting for a wealthy suitor because it is running out of cash. Persistent underinvestment in its oil and gas fields – with funding directed instead towards a costly nuclear programme – meant that even in the good times production was declining by between 4 and 8pc every year.
To make matters worse, during the boom years, the current government heavily plundered its Oil Stabilization Fund (OSF), once set aside as a rainy day pot, leaving its economy vulnerable to sharp falls in the oil price and lower demand during the recession. Now inflation has hit 25pc and unemployment is teetering on 20pc, more among the young.
It is also a question of expertise. My south London flat could be perched on top of the deepest oil well in the Western world, but it wouldn’t earn me a penny unless I invited some guys in hard hats and wellies to help me with the testing, extraction, refinery, transportation – and share the profits. Despite all its macho posturing, Iran, isolated from most of the world, is incapable of developing its spectacular, but increasingly hard-to-extract resources alone.
Many of the National Iranian Oil Company’s experts were replaced by political appointees when President Ahmadinejad’s government came to power. Now the country even has to import a third of its fuel because it lacks exploration technology and refinery capacity.
So this is why, it seems, Iran is belatedly responding to an order three years ago by the Ayatollah Ali Khamenei to sell 80pc of its state-owned companies to help increase natural gas exports fivefold by 2014.
There are other countries in a similar position.
Russia, too, is hankering after foreign funds to add to the $100bn it needs to exploit its Yamal peninsula. And Iraq is preparing to loosen its laws on foreign investment to entice the Shells and Exxons and Totals to become co-operators of its vast fields in its second ever auction of oil contracts.
But the question is: are the big oil companies ready for the regional instability and political unpopularity of Iran – that outweigh even the dangers of Iraq and hostility of Russia?
It is fair to say that energy companies tend to be fairly promiscuous with their attention – attracted by good resources in spite of political pressure. Just look at Shell, BP and BG Group blithely continuing operations in Libya as the controversy raged about the release of the Lockerbie bomber. But in the case of Iran, the major Western oil players face the prospect of excommunication from the US if they dare to flirt with this belligerent Middle Eastern nation.
Shell has already angered dozens of senators for reportedly exporting gas to Iran and over the past few years has repeatedly succumbed to last-minute nerves about joint ventures with Iran’s national oil company.
Who else could the biggest winner be but China (and possibly Brazil, Venezuela or Russia if they can find the cash)? Chinese state-run energy companies have been snapping up resources across the globe this year and already possess the expertise to run their operations efficiently and cheaply.
Most importantly, its leaders appear to care the least about whether potential partners are globally unpopular. China has too much global clout these days to fear too much reprisal.
