US oil delegation will be visiting Iran this week to review energy investment opportunities, a senior oil ministry official was reported by Mehr news agency as saying.
“It is forecast that by the visit of (the) American delegation this week and in the case of lifting sanctions on Iran’s oil industry, we will witness involvement of major international American oil and gas companies in Iran in the future,” Deputy Oil Minister Abbas Sheri-Moghaddam has said.
Currently, Western sanctions imposed on Iran prohibit, and in the case of the US, make it a criminal offence to trade, directly or indirectly, with individuals in the country and invest in the its oil sector or provide any form of financing.
Restrictions have been imposed on oil exports as well, which were slashed by more than half to around 1.1mn bpd from 2.5mn bpd prior to 2012.
Sanctions has for years been cripling Iran’s energy sector and gas had caused its economy and financial sector to stagnate.
The world powers known as P5 +1 have been working closely with Iran to alliviate and eventually remove sanctions and on 2nd of April reached a tentative deal, under which Tehran would have to restrict its nuclear activities in exchange for sanctions relief. A final settlement is expected to be made by 30th of June.
The lifting of sanctions is expected to attract the interest of foreign investors and revive Iran’s oil sector.
Sheri-Moghaddam revealed that some “European-American companies” have expressed readiness to invest in Iran’s new petrochemical projects.
George Booth, partner and expert in oil and gas at Pinsent Masons, commented: “…we are seeing more O&G operators getting their ducks in a row. Irrespective of price volatility, we’re seeing many organise finance, approach shareholders and engage with third party suppliers in the expectation that the sanctions will be lifted. They want to put themselves in the best possible position to secure access to Iranian resources.”
“Setting aside the current trading price, the long term view is that Iran is still likely to be central to the future of global natural resources. European oil and gas players, particularly small and nimble players, are keenly tuned in to the negotiations as they unfold.”
However, Booth urged operators to exercise caution in making plans for future investment in the country.
“…it is critical to remember that sanctions will not simply vanish even if an agreement to lift them is reached. This is just the start of the process and it will take time to unravel the complex web of restrictions on trade which have been in place for several years. Breaches can still be penalised in the transition phase and people need to be alive to that.”
“Detailed due diligence will play a major role in safeguarding against any breaches. Businesses should avoid signing on the dotted line and firming up any arrangements until it is clear that it is safe to do so,” he said.
U.S. companies are also prevented from investing in Iran’s oil and gas industries or trading with them.
