IHS Global Insight Middle East Energy analyst Samuel Ciszuk provides upstream analysis on energy developments in Iran:
Iran’s Oil Ministry has separated the National Iranian Gas Exports Company (NIGEC) from the National Iranian Oil Company (NIOC) and placed it under the structure of the National Iranian Gas Company (NIGC), according to a decree issued by Oil Minister Masoud Mir-Kazemi.
The reorganisation has been branded as a way of integrating Iran’s state-owned gas industry structures and speeding up development, with the managing directors Javad Owji (NIGC) and Reza Kasaizadeh (NIGEC) both now heading up the management of the strengthened NIGC.
The new NIGC will over the coming two months, according to Platts, establish two integrated departments—one focusing on gas imports, exports, transit, gas swaps and upstream ventures, and the other on LNG projects. NIGEC has not only been an export- and marketing-focused entity, but has been involved in the raising of finance and investment for Iranian gas projects, including overseeing upstream projects. NIGEC’s dissolution, or partial privatisation, has at times been reported by Iranian media, although the national control of Iran’s upstream sector means that there has been scant Iranian market interest in investing in the remainder of the company after its upstream involvement had been stripped out, Platts said.
Significance: Decoupling NIGEC from the vast NIOC framework makes sense in strengthening NIGC as a potential future national gas champion on its own, and should lead to lesser bureaucracy and more streamlined decision-making procedures.
Nonetheless, Iran’s main problems right now do not stem from organisational difficulties and red tape—although those issues too are important—but from a failure to secure financial commitments from foreign investors at upstream projects and a lack of funding from the state coffers, creating an investment crunch at a time of continuously spiralling domestic gas demand growth and an increased call on gas for reinjection from politically prioritised projects to arrest decline at mature oilfields.
The main culprit behind that two-pronged problem is Iran’s international isolation, with fewer and fewer international companies willing to commit to contract signings, preferring to sign memoranda of understanding (MoU) to keep a foot in the door but baulking on a potentially politically costly commitment.
