Saturday, August 31, 2013

Rohani's Oil Policy

Iranian President Hassan Rohani has appointed as oil minister Bijan Zanganeh, who had the post during the Khatami administration from 1997 until 2005.  Here are his plans:
Back then, Mr Zanganeh signed deals with many foreign oil majors, bringing billions of petrodollars to Iran. He decentralised the powerful National Iranian Oil Company (NIOC) and filled his ministry with technocrats. Some of these were blemished with financial scandal. On taking office, Mr Rohani’s populist predecessor in the presidency, Mahmoud Ahmadinejad, denounced them as the “oil mafia” and chucked them out. Now Mr Zanganeh has hired some of them back.
The minister is aiming to raise Iran’s crude-oil production to its 2005 level of around 4.2m barrels a day, a 60% boost on current output. He is promising to speed up work on the country’s South Pars offshore gas development, which has suffered big technical and financial problems as sanctions have scared away foreign investors. But his proposal to foster a competitive private sector to help develop Iran’s many stalled energy projects will pit him against the powerful Revolutionary Guard. This militia, answerable only to the supreme leader, Ayatollah Ali Khamenei, owns various engineering firms that have become involved in oil projects...
In recent years the government has typically offered “buy-back” agreements, in which the oil company gets a small, fixed return on successful projects, rather than “production-sharing” deals, in which the contractor gets a share of the output and thus stands to gain much greater rewards. A Tehran-based oil analyst says the NIOC is likely to offer production-sharing deals on some of the riskier projects on Iran’s border with Iraq. However, it will face objections from the many parliamentarians who believe that such contracts are unconstitutional, because they give foreigners a share of Iran’s natural resources.

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