Global oil companies cautious ahead of Iran’s licensing round

International oil and gas companies remain cautious ahead of the oilfield development licensing round expected to be launched on Tuesday, June 21, according to international law firm Pinsent Masons.

The bidding process is anticipated to grant international companies access to Iran’s natural resources for the first time since trade sanctions were lifted earlier this year.

Experts say Iran, which has the fourth largest oil and the second largest gas reserves in the world, presents a great opportunity for international oil companies since production costs are comparatively low.

The cost to produce one barrel of crude oil in Iran is estimated at around $12, compared to around $9 in Saudi Arabia and $36 in the United States, according to Drillinginfo.

However, energy experts say efforts to kick-start exploration and production (E&P) in Iran could be hindered due to the delay in finalising the new model contract outlining vital terms of investment and returns for oil and gas projects.

Iran plans to offer about 18 E&P blocks and 50 oil and gas projects worth about $85bn by 2020 under its new Iranian Petroleum Contract (IPC).

Also read: Iran says 80% of oil contracts with Europe are operational

Oil and gas expert at Pinsent Masons Niazi Kabalan said: “It is possible that the licensing round might focus on investment in existing infrastructure upgrades, and defer the grant of new exploration and production rights until the model IPC is finalised.

“There is still an appetite to invest in Iran across many parts of the oil and gas community.

“While the licence round signals support for overseas investment, the lack of clear terms means plans may well be put on ice for the short term. The model petroleum contract must be finalised if Iran truly wants to realise its global ambitions.”

Iran’s oil sales have nearly doubled since December and the country’s crude oil production has reached 3.8 million barrels per day (bpd), oil minister Bijan Zanganeh said earlier this month.

Also read: Iran has no plans to freeze oil exports, official says

“Iran’s oil exports have doubled since February,” he was quoted as saying by news agency SHANA.

He also stated that Tehran has exported more than two million barrels per day after the lifting of sanctions.