Analysis: Iran upbeat on oil forecasts, analysts sceptical
TEHRAN: Iran is painting a rosy portrait of abundant crude reserves and predicts almost doubled output capacity by 2020 but development of new fields is sluggish, weighed down by convoluted contracts that deter investors.
Oil Minister Bijan Zanganeh said last week that Iran’s recoverable reserves were now second only to Saudi Arabia’s, standing at 132 billion barrels.
BP’s annual statistical review pegs Iranian reserves fractionally lower at 130.7 billion barrels.
Mr Zanganeh dismissed suggestions from reporters that Iran was angling for a bigger slice of the OPEC cake, fearful about Iraq’s abundant crude resuming its former position in the cartel’s allocation of quotas.
Iranian OPEC Governor Hossein Kazempour Ardebili has said these burgeoning reserves could be translated into increased output capacity of eight million barrels per day (bpd) by 2020, surging from 4.2 million bpd now.
The shorter-term target is five million barrels by 2010.
But analysts think Iran’s chances of meeting such targets are slim.
“That Iran will match that is almost impossible,” said upstream analyst Iain Brown of Wood Mackenzie.
“They need a combination of technology and investment and they are just not going to get it,” he added.
Iran’s tortuously complicated “buy-back” contracts have deterred many investors. Under these contracts foreign companies develop a field for a short period and are compensated with output before the state oil company “buys back” the field.
Sources close to talks say the Iranians, because of political pressure not to surrender the nation’s resources to foreigners, often change terms in the middle of negotiations.
One Asian company complained the price of a project phase had been doubled overnight.
A European diplomat said one company was told just before signing a deal that Iran had added a clause demanding the firm not operate in any other Gulf state. The company walked away.
Foreign companies shun fields: After a Japanese consortium signed a deal to develop the giant Azadegan field in February, there were hopes a flurry of deals would follow but foreign investors are still wary of “buy backs”.
Cepsa and OMV got fed up after three years negotiating over the Cheshmeh Khosh field.
BP and Total are still locked in attritional negotiations with Iran over the Bangestan field, although Iran had promised a winner by March.
Mr Zanganeh said the British company’s position was “problematic” after Chief Executive John Browne said it was the wrong time to expand in Iran.
Companies looking to invest in Iran have to balance pressure from Tehran’s arch-foe Washington, which accuses Iran of funding militant groups and seeking nuclear arms.
Other oilfields are not coming onstream as quickly as it was thought they would.
Iran first pledged to have the Gulf Soroush and Nowruz field pumping at 190,000 bpd capacity by March. Last week, its operator Royal Dutch/Shell said it planned for the field to reach capacity “by the end of the year”.
Iran has also set an ambitious 160,000 bpd target for its Darkhovin field in 2005.
But Wood Mackenzie analyst Brown said 2008 was a more realistic figure, noting that the state oil company had originally targeted only 30,000 bpd until Italy’s ENI had shown what improved technology could muster.
ENI on its Web site sees their own cut of Darkhovin production peaking at 22,000 bpd in 2007.
Soroush, Nowruz and Darkhovin have featured prominently in Iranian rhetoric on lifting capacity.
A new five-year economic plan (2005-2010) seeks to lure foreign investment by loosening restrictive “buy back” agreements but powerful conservatives are demanding important sections be redrafted.
Iran is promising new exploration contracts that will give automatic development rights to a company that strikes oil.
But all blocks offered under such terms are in unattractive areas outside of the oil-rich southwest where the Islamic Republic has imposed a moratorium.—Reuters