Iran deal would help domestic firms
Iran’s bureaucracy has been nervously watching the unfolding negotiations with the P5+1 group of global powers
The outcome was unknown at time of press but most pointers suggest a deal will eventually be agreed this year that will lead to the unwinding of sanctions and the Islamic Republic’s re-emergence as a major hydrocarbons power. This will benefit local companies, with consequences for foreign investors desperate to lay their hands on the oil and gas wealth.
Iran and the six other countries agreed a deadline of 30 June to reach an accord that would swap the curbing of Tehran's nuclear activity for relief from economic sanctions. That deadline was extended but the negotiating teams seem committed to seeing the deal through.
Iranian officials are eager to capitalise on the fresh attention that has come their way by pointing to new oil contract terms designed to bring investment and technology back to the impoverished oil and gas sector. These terms are said to include more flexibility on payments, offering investors returns that match the risk rather than fixed flat fees.
The National Iranian Oil Company (NIOC) and the other arms of the state energy bureaucracy will still have to convince IOCs that the unpopular buy-back services contract model has been fully ditched. They will also need to reassure local services companies and contractors that they will not be squeezed out in the process.
Iranian services players and equipment suppliers have found the last 10 years of sanctions to be fruitful, free from foreign competition. They have become better at their jobs in challenging circumstances and they will not want to be elbowed out of the way by foreign interlopers.
The commercial affiliates of the powerful Iranian Revolutionary Guards Corps (IRGC) are particularly keen to profit from the country’s opening. The IRGC’s construction arm, Khatam al-Anbia — heavily sanctions hit — has interests in a key parts of the giant South Pars gas development.
It fears losing out from a deal signed off by reformists, and will work hard to ensure it benefits from the putative upstream opening. With hard cash set to be unleashed –some $100bn of funds in overseas bank accents are expected to be unfrozen – Iranians will prove difficult partners to exclude from the impending hydrocarbons bonanza. That prospect may curb some of the majors’ barely disguised enthusiasm for a post-sanctions Iran.