Why Oil&Gas and Energy Sector in Iran is a point of attraction for investors

In the first six months of 2017, the international oil & gas market has started to rebalance, following a period of suppressed prices that has stalled the US shale revolution and prompted OPEC1 intervention, with an agreement to take 1.2 mmbbl/d off the market.

Boasting the world’s largest proven gas deposits and fourth-largest proven oil reserves the size of the Iran’s hydrocarbon reserves presents indisputable significant potential. What’s more is that the current political leadership has displayed progressive reform and begun to rebuild relationships with the west, following decades of sanctions. Since then, a number of bold steps have already been made to swiftly rejuvenate the country’s economy and draw much-needed investment back to its primary industry – oil and gas.

To increase the gas by circa 50 percent and planned to nearly doubled oil production volumes ambitious targets are set across the upstream for the next four years. Companies must find way to address certain gaps like that of capability, financial and technical to gets close to the targets. The six key pillars that can help to achieve the targets are: Improving global perspective and entry to the new market, increasing the customer base in order to reach desired export targets, attracting foreign investment, optimum utilization of resources, gas monetizing strategy, and laying foundation for the capability building mechanism. If Iran follow the direction of theses key pillars and delivered the results, how long will it take Iran to become the world’s largest gas exporters.

Iranian’s potential in oil and gas

1.      Historical Context

Since we have to understand the ongoing situation of the Iran. It is helpful to see briefly its history. 1953, followed by two decades have been seen as the time of immense growth for the oil and gas sector. Further oil income is as follows.

1954 – The income 5 billion.

1976 – The income was 19 billion.

Iran became the second largest OPEC exporter and producer of oil. Iranian government started to strengthen the sector by investing 40 billion between 1997 and 2005 in around mid 1990s. Countries like France, Italy, The Netherlands, UK, Russia and china during the early 2000s made agreements with the ministry develop oil and gas sector.

But in spite of these hampering situations Iran’s economy given steadily and its impact is global.

2.      Infrastructural Condition

When the oil prizes comparatively high in around 1970s large volumes of gas were injected in the oil reservoirs to increase the amount of the production volumes but around the late 1970s there has been a rapid reduction in the same which leads to the strike in upstream sector.

Fissure in Iran’s oil and gas sector

As mentioned above to reach the ambitious targets its necessary to follow the pillars. To cover up the gaps of the country’s up streams industry.

The current structure of industry had made it difficult for Iran banking system to engage in the oil and gas enterprise historically financial institution have been very hesitant to provide support large investments in Iran over the past six to seven years the average oil production volume has been around 3 mmbbi/d, an export volume have been around 1mmbbi/d. Applying the 9 percent annual increased production there is still a gap of 1.4 mmbbi/d that would need to be filled through new assets in order to achieve desired target by 2020. i.e. 8mmbbi/d.

Now if we look at the gas production there many large developments lived up which includes the south and north pars and Kish. So we can say that it is possible that Iran night achieve its gas production target of 390 bcm/y by 2020. However the gas is not utilized optimum way. That is between domestic and industrial sector.

A step up for Iran

For Iran to get back in the line and prove itself as the fourth largest oil and gas global player behind US, Russia and Saudi Arabia. It’s a necessity to have a clear vision. Iran has its strength in a way of resources like the reserves of gas. Also Iran is located between the European and Asian markets which to be cherry on the top of the cake for Iran. To support the sustainable growth in the industry the six pillars are must to follow as given below.

1.      Improving global perspective and entry to the new market.

2.       Increasing the customer base in order to reach desired export targets.

3.       Attracting foreign investment

4.      Optimum utilization of resources.

5.      Gas monetizing strategy.

6.      Laying foundation for the capability building mechanism.

If Iran is able to convince international investors of the opportunity and is able to retain the development then it is quite feasible that one day Iran could become the world’s largest exporter of gas and oil globally.