TEHRAN: Executives from Royal Dutch Shell and Eni have met Iranian officials in Tehran to discuss investing in the country’s energy industry, the first time international oil groups have publicly confirmed such talks ahead of a possible nuclear deal with the west.
The meetings, which took place in May and June, are evidence of the growing interest among big oil companies in Iran, which boasts the world’s third-largest oil and gas reserves but which will need tens of billions of dollars of foreign investment to realize its ambitions to nearly double production by the end of the decade.
A Shell spokesman told media that its officials met counterparts in Tehran this month to discuss outstanding debt owed to the National Iranian Oil Company for crude that had been lifted but not paid for. He added: “They also discussed potential areas for business co-operation should sanctions be lifted.”
“We review our growth portfolio on a regular basis and do not exclude any countries that are open to foreign investment,” the company said. “Should future sanctions relief make that possible, we would be interested in exploring with the government of Iran what role Shell can play in developing its energy potential.”
Iran produces about 2.7 million barrels of oil a day. But a report by Wood Mackenzie, the energy consultancy, to be published on Thursday, says that it could add 600,000 b/d of crude production by the end of 2017, assuming that it strikes a nuclear deal with the U.S. and EU that lifts sanctions.
Western negotiators have given themselves until June 30 to seal a final, permanent accord aimed at curbing Iran’s nuclear program in exchange for the rollback of sanctions on the Islamic Republic.
The longer term gains for Tehran from such a deal could be even greater, says Wood Mackenzie, which sees a rise in total output capacity to as much as 4.4m b/d by 2025. This increase, though, would require $50 billion of foreign spending, it said.
It emerged on Wednesday night that Claudio Descalzi, Eni chief executive, flew to Tehran in May for talks with Iran’s oil minister Bijan Zanganeh.
The Italian oil major said Mr. Descalzi discussed “the company’s outstanding credit position as well as the possibility of investing in Iran’s oil and gas industry again.”
“Eni reiterated its interest in Iran, provided sanctions were lifted and contract terms were mutually favorable,” it added.
Iran has ambitious goals to increase its oil production capacity to about 5m b/d by the end of the decade.
Industry insiders say that in an effort to coax back foreign companies who pulled out in 2010, it is drawing up new contracts that would replace earlier and widely disliked “buyback” deals with more attractive terms treating foreign groups as joint venture partners rather than as contractors.
There would also be some flexibility on remuneration, giving foreign investors a rate of return that varies with the risks taken and the oil price, rather than a flat, fixed fee. Contracts would also run for longer, up to 30 years, according to Iran-focused consultancy Energy Pioneers.
