Iran to target US$185bn of oil and gas projects by 2020

Tehran - Babak Farrokhi - Wikimedia CommonsTehran hopes to sign contracts for about 50 oil and gas projects by 2020. (Image source: Babak Farrokhi/Wikimedia Commons)With economic sanctions against Iran set to be lifted, the country has set its sights on oil and gas projects worth US$185bn by 2020

Hossein Zamaninia, Iran’s deputy oil minister for commerce and international affairs, said that Tehran has identified nearly 50 oil and gas projects worth US$185bn that it hoped to sign by 2020. He added that Iran has defined a new model contract, which it calls its integrated petroleum contract, in preparation for negotiations with possible foreign partners, and that the new contract would be introduced in international markets later this year.

“This model contract addresses some of the deficiencies of the old buyback contract and it further aligns the short and long-term interests of parties involved,” he told delegates at a conference in Vienna.

Iran has been keeping millions of barrels of oil in floating storage so that it can make deliveries quickly to its customers as soon as sanctions are fully lifted. Traders have been speculating about the nature of oil in storage, with some saying that a substantial portion of it is crude. If true, that will add to the global over-supply and could further drive down already low oil prices.

However, Iranian oil industry officials have denied this, saying most of the oil kept in floating storage is condensate and fuel oil.

Traders in Asia seem to agree with Iranian officials, as do analysts at Morgan Stanley. A note from the company said, “Iran oil storage concerns are likely overblown. Industry sources suggest that a large portion of the Iranian crude stored on floating tankers is condensate.”

On the other hand, some traders say Iran has stored crude on tankers and is reluctant to let the market know because it could depress prices. The reasoning is that if the market knew that Iran had so much crude floating, traders would demand deep discounts to clear the stockpile.

Another line of reasoning is that keeping large quantities of fuel oil in storage made little sense for Iran, since it could sell the fuel oil despite the sanctions to raise much-needed cash.

Iran’s stock of condensate has been building up since April this year, following a fire at a Dragon Aromatics' xylene plant in China. The petrochemical producer was the biggest Chinese buyer of Iran’s South Pars condensate, buying two million barrels of South Pars condensate every month before the fire.

China’s imports of Iranian crude have been rising steadily, and June 2015 saw the country importing 671,800 barrels of crude oil daily from Iran, according to statistics issued by China’s Customs House. China, the biggest customer of Iranian oil, imported 2.76mn tonnes of crude oil in June, which was higher by 29.6 per cent in comparison with May and by 26.5 per cent compared to June 2014.

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