Baku, Azerbaijan, August 4
By Dalga Khatinoglu -- Trend:
Experts of an international energy company estimate the international companies are still waiting for removal sanctions on Iran, despite the intensive visits of EU delegations to Iran.
While European delegations from Germany visited Iran and delegations from France, Italy, Austria, UK and Poland are to visit this country to discuss economic ties, Iran hopes to attract tens of billion dollars in its oil and gas sector.
The United Nations Conference on Trade and Development (UNCTAD) estimated that the EU's outflow direct investments in 2014 were $250 billion.
"Although some international oil companies eyeing to revive business with Tehran have already held talks with Iranian officials, they will be waiting for the complete removal of sanctions before daring to dip their toes in the water," Tom Ellacott, Head of Corporate Analysis at Wood Mackenzie told Trend August 4.
"Whilst the nuclear deal represents the first step for foreign companies to head back into Iran, the full process will take longer as further hurdles will need to be overcome before new European investment into the oil and gas sector becomes reality," he added.
Ellacott added, "this is why we do not expect new foreign investment before late 2017 or early 2018. This also slots in nicely with what we expect to be a period of rising cash flow from the main IOCs that are likely to invest as oil prices start to recover and major new developments are brought online."
According to OPEC's estimation, OPEC would need to invest an average of close to $40 billion annually in the remaining years of this decade. This figure was $120 billion in 2014 or three times more than the annual investment amount.
However, according to Wood Mackenzie's estimations, the plunge in oil price since last summer caused the suspension of 46 big oil and gas projects. The worth of suspended projects in 2015 is estimated to reach about $200 billion.
The cost of oil production in Iran's onshore sector, which shares 70 percent of total reserves is about $7 per barrel, according to Iranian official statements, but regarding the fact that more than 80 percent of Iran's operative fields are in their second half-life, this figure will increase in coming years.
Currently, the cost of producing 3 to 3.5 million barrels of oil in Iran's active fields is $10 billion annually, mostly due to re-injection of 93 million cubic meters per day of gas to old oilfields, while this figure would reach $50 billion in the next 10 years.
However, Iran has tens of undeveloped oil and gas projects, which need about $185 billion investment by 2020, according to Iran's Oil Ministry.
"Iran's oil and gas industry is thirsty for investment. Years of underinvestment have prevented the country from fulfilling its hydrocarbon potential," Homayoun Falakshahi, Middle East Upstream Analyst for Wood Mackenzie also told Trend.
"Following sanctions removal, the next crucial step will be the unveiling of new upstream fiscal terms. The recent disappointing Mexican bid round showed that IOCs will need terms that hit their hurdle rates, especially given the risks involved and the fact that capital discipline has been tightened up in response to low oil prices. But if Iran releases top quality assets, with scale and reasonable fiscal terms, the industry may well rush to get their hands on them, especially given the scale of the future opportunities that might be made available for those that establish first mover advantage," he said.
Edited by CN