Asia unlikely to plug all holes in Iran’s energy industry

The world’s largest energy consumer - the United States - bars its companies from investing in Iran’s oil and gas and has put pressure on European and Asian firms to also stay out. State-owned Asian energy heavyweights, anxious to secure future supplies for fast-growing economies, have instead increased their role in the world’s fourth-largest oil producer.

“Iran’s call on international financing for oil and gas can easily be moved to the east from the west,” said Hojjatollah Ghanimifard, vice-president for investment affairs at state oil company NIOC. “We have learned to live without US technology, help and money. How easily we have been able to find new partners.”

Analysts are skeptical Asia can plug all the gaps. “Iran will of course say to the West ‘we don’t need you, we can get what we want elsewhere’,” said Giacomo Luciani, director of the Swiss-based Gulf Research Centre Foundation. “But I don’t believe it. They haven’t been able to meet their long-term objectives.”

The Islamic republic’s 2010 oil capacity target has slipped to around 4.5 million barrels per day from an earlier target of 5 million bpd. Capacity stands at around 4.3 million bpd. Iran’s Oil Minister Gholamhossein Nozari said late last year Iran needed $150 billion to $160 billion to boost oil and gas output capacity over the next seven years.The US has put pressure on international banks to stop finance for business with Iran, seeking to isolate Tehran on the international stage over its nuclear program. Tehran insists its nuclear work is peaceful.

Asia is expected to provide a large part of the world’s future energy demand growth, so big Middle East oil and gas producers are already gravitating toward their future market. But US and United Nations sanctions have forced the pace for Tehran. “Iran is moving toward Asia more quickly than it would do otherwise,” Luciani said. “Iran wouldn’t go that way so rapidly if it had access to western technology.”

NIOC plans to boost its crude exports to China and India and says it has easily found buyers to replace those that have refused to purchase its oil. “This hasn’t affected our exports at all,” said Ali Asghar Arshi, executive director for international affairs at state oil firm NIOC. The state-run company is also in talks with Asian companies over exploration rights in the Caspian.

CHINESE BID

China’s state-backed offshore oil company CNOOC is negotiating a $16 billion deal to develop a gas field and build a liquefied natural gas (LNG) terminal and India’s ONGC is awaiting Iran’s nod on a $3 billion development plan for the Fars oil and gas block. The deals have yet to be signed and in any case, analysts say Asia cannot provide Iran with the technology it desperately needs and international oil companies possess.

Iran holds the world’s second-largest oil reserves, but the rate of recovery from producing fields is 20-25%, analysts said, below the industry average of around 35%.

In particular, Iran needs technology to boost output from ageing fields, overhaul refineries and export more gas. “Iran definitely needs help on enhanced oil recovery,” said Mehdi Varzi of London-based consultancy Varzi Energy. “A lot of its oil is very heavy oil.” To help cope with this heavy, difficult-to-process crude, Tehran has big plans for the refining sector and aims to almost double capacity to around three million barrels per day by around 2012, up from around 1.7 million bpd. But it needs technology licenses from foreign companies to build the complex units that can boost yields of transport fuels. (Reuters)