Monday 26 September 2011

Iran: Buyback contracts needs revision

Addressing a meeting of local manufacturers and contractors Petroleum Minister Rostam Qasemi made several statements about Iran's oil industry. He noted that domestic buy-back contracts will be modified by adding some incentives to be attractive for local investors. He also indicated, 'If we intend to accelerate the development of joint oil and gas fields, the interest rate paid to domestic banks, manufacturers, contractors and even individuals (through offering rial-denominated bonds) should increase.'

Iran contractors face tough demands from domestic banks, he pointed out, including huge guarantees and 20 to 30 per cent interest rates; these demands jeopardise work timetables and the viability of projects. Each year more than $50 billion is needed to be invested in oil industry infrastructure. Some of these funds have been taken into account in the Ministry's budget but the rest, said Qasemi, should be provided through other channels such as selling bonds.

Petroleum Ministry plans to sell foreign exchange bonds, to increase energy funds at local banks, and to sell paper oil on bourse. The Ministry will also be able to take $20 billion from the National Development Fund (NDF). The funds could be lent with low interest rates to private sector and local manufacturers involved in oil industry activities.

In the meantime, NIOC managing director Ahmad Qalebani said that from 21 September 2011 new oil and gas contracts will be signed with new methods and formats that will make them more attractive for contractors and financial organisations.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2011 Menas Associates

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