Iran’s oil-and-gas industry was supposed to take off after the nuclear deal. Instead, one of the world’s largest energy sectors is languishing.

International oil companies are staying on the sidelines as the Trump administration threatens to rip up the 2016 deal and reimpose oil sanctions lifted in exchange for limits on its atomic-power program.

Iranian officials predicted the deal would result by now in $10 billion a year in fresh foreign spending in the oil and gas sector. But only about $1.3 billion has been injected over two years, mostly from China, said Homayoun Falakshahi, an Iran-focused analyst at the oil consultancy Wood Mackenzie.

After an initial uptick, oil-production capacity has plateaued at 3.85 million barrels a day, according to the International Energy Agency, far below the varying estimates that Iranian officials have predicted over the years. France’s Total SA signed a $1 billion deal on President Donald Trump’s election day that was touted as heralding a rush of Western investment, but it remains the only one to forge ahead.

French auto-maker Peugeot and aircraft producer Boeing Co. have found ways to make deals  in Iran, but the energy sector has lagged because these investments would be multi-billion-dollar, potentially decadeslong affairs with high visibility to the U.S. government. In Iran, hardliners opposed to foreign investment have pushed back against President Hassan Rouhani’s plans to sweeten the pot for oil companies.

A weekend conference in Tehran was supposed to be a showcase of the country’s energy potential. British oil giant BP  PLC, French energy company EDF Group and Germany’s Wintershall AG sent representatives, people familiar with the matter said.

But these companies are hesitant because they or their parent companies have U.S. operations that could be affected if sanctions were reimposed, the people said.

“It’s depressing,” said an Italian executive whose company has been trying for years to sign an oil deal in Iran.

BP declined to comment. EDF didn’t respond to requests for comment. Wintershall said it is “closely following the developments” in Iran and follows all laws.

The oil industry was expected to be the easiest piece of Iran’s economy to fix after almost a decade of sanctions curbed its crude exports. Iran has the world’s fourth-largest reserves of oil and the largest natural-gas assets—much of it still untapped. Big oil companies like BP had long experience in Iran, the expertise to unlock oil from its sometimes difficult geology and the willingness to go back in under the right terms.

Iranian officials acknowledged that foreign investment was coming in more slowly than expected, blaming the U.S. for sowing fear and uncertainty.

“I am not satisfied,” said Iranian Oil Minister Bijan Zanganeh in an interview. “But we are trying and I am optimistic.”

Mr. Trump has set a May 12 deadline for amending the nuclear deal or setting a course that could revive sanctions on Iranian oil sales. A U.S. State Department official said the U.S. was upholding its side of the deal “while holding Iran strictly accountable to its commitments.”

U.S. officials are concerned about Iran’s support for groups like Hezbollah  and its ballistic missile technology, among other things.

Iran did get economic relief after sanctions were lifted, with exports rising by almost a million barrels a day and investments pouring in from China. Those barrels helped stave off a financial collapse, got Iran’s economy growing again and eased rampant inflation.

But its anemic comeback since has helped foster broad disappointment among average Iranians . Economic concerns were the initial focus of widespread demonstrations this year that transformed into a broader condemnation of Iran’s ruling system.

Iran’s economic growth is forecast to fall to 4.2% during this fiscal year from 6.6% the year before, according to the International Monetary Fund, citing flat oil production and uncertainty over the deal. The Iranian rial has fluctuated wildly .

Mr. Zanganeh said he expected to make deals with foreign oil companies in the coming weeks, and Russian state media reported that Russian oil companies were planning to invest in Iran. Some Western companies are looking at deals in Iran, including Baker Hughes GE, which is trying to find a way to use non-American staff to supply equipment and services for Total’s Iranian gas project, people familiar with the matter said.

A Baker Hughes GE spokeswoman said its “commercial engagement in Iran is limited to those activities that are consistent and compliant with U.S. government rules, licenses and policies.”

The U.S. still bars all dollar transactions with Iran, complicating matters because oil is traded in greenbacks. Big banks are reluctant to provide financing for Iranian deals.

According to people familiar with the matter, Total has had to assemble a group of little-known small banks from China, France and Italy to transfer money for its project to increase production at Iran’s largest offshore gas field.

Total said its gas project “is progressing as per plan” and its use of small banks was in compliance with all laws.

Iranian hardliners have been working to limit foreign investments like Total to natural gas, which is less politically charged in Iran because it isn’t exported in large quantities like crude oil.

But last month, Iran canceled a preliminary deal with a Norwegian company to build the country’s first liquefied-natural-gas offshore export facility after criticism from hardliners.

Local oil contractor Mohammed Hadi Rahaeari drew loud applause this weekend from a mostly Iranian audience at the conference by calling for local companies’ needs to take precedence over outside firms.

“You should build your house first before letting foreigners in,” he said.


Benoit Faucon

Iran’s Oil Boom Hasn’t Showed Up

Post navigation

Leave a Reply

Your email address will not be published. Required fields are marked *