Efficacy to outdo ownership of Iranian IPC partners: expert

Efficacy to outdo ownership of Iranian IPC partners: expert

Tehran, Iran, October 17

By Mehdi Sepahvand - Trend:

John Roberts, energy security specialist at Methinks, believes that the efficiency of the Iranian companies that the Oil Ministry introduces as partner to foreign investors is much more decisive than their ownership.

"The international companies that sit for talks with Iranians, they are in a position to judge if their partners really are effective companies. Whether they are private or public companies is less important than whether they are effective partners," Roberts to Trend October 17.

The Iranian Oil Ministry recently introduced eight companies as obligatory partners of foreign investors that would like to work in Iran under the newly developed model Iran Petroleum Contract (IPC).

However, the selection of the companies came with two shortcomings. One was that they did not initially meet the ministry’s technological standards, so the ministry had to lower its threshold to have the eight companies pass. The other shortcoming was the companies’ ownership.

It has turned into a major question for foreign investors in oil and other sectors whether once they sit for talks with an Iranian to-be partner the company is held privately or by the state. Many companies start talks with Iranian partners only to find later that they are held by entities close to power. This created many problems for international business with Iran as the government was under sanctions, and still continues to be a glitch as a set of primary US sanctions remain in place.

"If the company is well run, if it operates on transparent grounds, and if it’s technologically competent to do the job it is supposed to do, it doesn’t matter if it’s held privately or by the government," Roberts, who is the chief analyst of Natural Gas World reiterated.

"You have to ask the question is a company private simply because the government has officially divested it or has it simply passed it on to people who are still very closely connected to the state. So what is important is effectiveness rather than nominal status."

Regarding the IPC, the said it is yet to be found if Iran is in a position to attract the kind of investment it wants to.

"The next year will tell us if the IPC is flexible enough to achieve its goals. The IPC has got interesting things to it that the foreign companies have come to look at. However, on the whole the foreign companies have not yet committed themselves to investment in Iran," he observed.

"We know the IPC has enough to get talks started, but we don’t know whether the contract itself and the way the Iranians wish to see it implemented is sufficient to ensure this country gets the kind of investment it really wants."

Asked about the feasibility of Tehran’s ambitions in the current global market, Roberts said, "Regarding global atmosphere, I think some of the ambitions can be met. JCPOA is a great help, but you need to know if you can do business in Iran given accessing finance and handling finance under continuing US financial restrictions."

"Second is how realistic Iranians are. They talk about a stable 8-percent growth. That is remarkable for a country at this stage of development. China and India achieved that, but the more comparable Turkey, whenever it achieved that growth, it was followed by recession to zero or so. It never got sustained 8 percent growth."

"So I think they are probably being over-ambitious. And my worry is if that’s the kind of talk they believe they can achieve, what happens if they do not."

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