Iran: Who's the boss?

The Majles has approved the outline of a bill to determine the scope of authority for the Ministry of Petroleum (MoP) with regard to the oil sector. The relevant areas of authority are the process of decision making over oil issues, related executive affairs, issues relating to investment, and Ministry international relations.

The bill also envisages a mechanism of common consensus for choosing top directors in key institutions such as the National Iranian Oil Company (NIOC). It calls as well for the approval of all oil and gas contracts by the cabinet before they become effective. MPs are still engaged in discussions over various parts of the bill, and it is expected to be finalised by 21 March. The government has already objected to the bill on the grounds that it would effectively reduce the president's authority over several key oil industry issues. This is particularly significant when considering that a large proportion of government revenues comes from petrodollars and that the president has always tried to put his own picks in crucial MoP posts to make sure decision making supports the interests of his camp.

One controversial aspect of the bill is a mechanism for 'sharing the oil produced at the fields with the contractors.' Production-sharing agreements (PSAs) have always been considered against the Iranian constitution. Critics say that PSAs could also prove detrimental to oil reserves, particularly now that MoP is awarding deals to locals with little expertise. For their part, international contractors have long complained about the inefficiencies of the current buy-back model and emphasised that they would be more interested if Iran adopted PSAs. If the bill is finalised it would open new possibilities for oil industry contracts.

Another controversial aspect of the bill is that it would allow certain state organisations outside the MoP to make decisions about marketing a share of Iranian oil. While the details are still unknown, it is clear that putting decision making over a portion of crucial petrodollars into the hands of institutions beyond the government could disrupt the Iranian economy.

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

© 2012 Menas Associates

Iran threatens to cut India exports

The Iranian government has threatened to cut off oil exports to India by August if India does not make payments of over $2 billion for oil it has already received from Iran. The National Iranian Oil Company (NIOC) made the warning in a letter sent to Indian refineries that had been purchasing Iranian crude on credit.

The controversy began late last year when the Reserve Bank of India stopped using the Asia Clearing Union (ACU) to settle Indian payments to Iran because of ACU's non-adherence to US and EU sanctions. Ever since, India and Iran have examined alternative payment mechanisms, with no apparent success.

Fars News Agency later questioned the authenticity of the news, referring to an unnamed informed source at the Ministry of Petroleum who blamed foreign media for releasing reports based on what they have heard. This is while two Iranian industry officials confirmed sending a letter to Indian refiners.

Iran's threat comes at a time when the Saudis are significantly increasing their oil production and exports. Saudi Arabia, which is India's largest supplier of oil, has already offered India an extra 2.5 million barrels of crude to replace any loss of Iranian imports.

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

© 2011 Menas Associates

Iran and South Korea pen South Pars development deal

Iran and an unnamed South Korean energy company have signed a $750 million agreement to develop two phases of the South Pars gas field. The South Korean company signed the deal with the National Iranian Oil Company (NIOC) six months after South Korea's GS Engineering and Construction Company (GS E&C) pulled-out from the project.

Under the deal, the South Korean company will develop phases 17 and 18 of the South Pars field in the southern Iranian city of Asalouyeh. The project is 50 per cent in progress and work is expected to commence in March 2011.

The development of phases 17 and 18 are expected to produce 50million cubic metres of natural gas, 80,000 barrels of natural gas condensates and 400 tonnes of sulphur on a daily basis. Additionally, they are also expected to produce up to a 1million tonnes of ethane and 1.05 million of liquefied petroleum gas.

Source: International News Network, Press TV

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