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Iran Pioneers Oil Bourse
The quantity and type of commodities and products and the volume of
transactions on the trading floor will be high.
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Dr. Mohammad Javad Assemipur, Minister of Oil Advisor |
Surviving
in a modern world would need attention to future changes and challenges in
addition to endeavoring to make up for past shortcomings and Iran, as a
developing country, is no exception to this rule.
Global
increase in demand for oil and its derivatives and the soaring share of member
countries of the Organization of Petroleum Exporting Countries (OPEC) in
meeting that demand has highlighted the role of reconstructing the energy
sector in most countries enjoying energy, especially oil and gas resources,
and has necessitated the replacement of the traditional system for trading oil
and its derivatives with new systems.
Experiences in such countries as England and Singapore that carry out their
dealings through special bourses indicate possibility of establishing an oil
bourse in the Persian Gulf region where enormous dealings in oil are being
carried out.
Iran has
taken the first step for establishing an oil bourse in the country and the
Middle East through studies on the possibility of opening a trading floor for
oil, gas and petrochemicals. Dr. Ghanimifard, Director of the International
Relations Department of the National Iranian Oil Company believes that
launching the trading floor would be the first step of a long-term plan to
determine the best price for oil products.
The
emphasis put by the Third Plan Law on improving structure, transparency,
competitiveness and providing grounds for participation of the private sector
in oil products trading floor, especially the law that has obliged the
government to establish bourses for various commodities is considered the main
reason for opening such a trading floor, which can lead to reducing the risk
of price fluctuations and increasing oil revenues.
Dr.
Mohammad Javad Assemipour, who is responsible for designing, launching and
establishing the oil, gas and petrochemical trading floor said that according
to the current plans, the Oil Ministry would be only in charge of design,
launch and establishment of the trading floor while it would be finally run as
a nongovernmental organization (NGO) that is to encompass all activities
related to hydrocarbon substances after becoming fully developed.
Since the
first outcome of every bourse is transfer of money from depositors and
investors to economic corporations and units or the government that face
shortage of financial resources, capital and liquidity for their long-term
finance projects, establishment of an oil bourse in addition to making serious
changes in the structure of the oil industry and the process of selling oil
and its products, would not only reduce the impact of fluctuating oil prices
on the Iranian economy, but also lead to better allocation of resources,
controlling money and liquidity and, finally curbing inflation through
absorbing wandering capitals inside the country. Meanwhile, its performance
can pave the way for inflow of foreign capital by attracting oil industry
owners and capitalists.
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Iran has taken the first step for establishing an oil bourse in the
country and the Middle East through studies on the possibility of
opening a trading floor for oil, gas and petrochemicals.
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Experts
believe that performance of an oil bourse in view of the geopolitical
situation of Iran can end up in more consolidation of the oil market too and
result in more security in oil supply and demand.
Assemipour says, “Establishment of a trading floor as a prelude to an oil
bourse will increase security of oil dealings in the oil products market. At
the same time, close relations between the bourse and international markets
would bring more stability to dealings in such products.”
The
establishment of a trading floor as a predecessor to the oil bourse could turn
Iran into a pioneer in trading oil and related products in the Middle East and
just in the same way that Bahrain is on the verge of becoming one of the
biggest financial markets in the region and the United Arab Emirates is
spearheading regional trade through its free zones, launching the course would
turn Iran into a leading force in regional oil dealings.
Studies
aimed at finding a location for the trading floor and selection of the
contractor would be complete by the year-end. After sending the notice and
details of preliminary measures of the project for more than 160 companies in
the world, now correspondence with proposing companies has started to complete
their proposals, so that, after receiving proposed prices approved by the Oil
Ministry, negotiations with participants for determining the domain, details
of work and price would get underway.
The
winner of the project should provide needed guarantees for the efficiency of
the designed system up to the end of the project and after inauguration.
Meanwhile, since the project would be divided in several phases, studying
various parts of the trading floor would be carried out in parallel and it
would be implemented in the course of time. Therefore, it would start its
activities with trading some special oil products in the short run and then
would attend to other products.
Due to
the nature of oil and its products, it is projected that the quantity and type
of commodities and products and the volume of transactions at the trading
floor would be high. Therefore, traders should be efficient and technical and
financial capacities of agencies in the trading hall should be adequate.
The
preliminary description of the trading floor comprises 18 paragraphs on the
location of the trading floor, defining financial and legal structure of the
bourse, conditions of the agencies, the method of establishing dealer
companies, software system and structure of bourse communications, types of
bourse contracts, specifications and conditions for delivering products after
purchase and the quality of future transactions.
Observing
international standards for commodity delivery goods, adapting communication
systems of the dealings hall with that of the global bourses, regulating
information and communications systems to establish relations and transactions
with global markets and preventing losses incurred by domestic traders,
designing system of regulations for handling economic cases by considering
international pricing systems and providing related software and hardware as
well as educational planning for the agencies are some points to be taken into
consideration for the establishment of a trading floor for oil, gas and
petrochemicals.
The
trading floor would also need accounting, financial, legal and managerial
structures as well as specific regulations for transactions, defining typical
contracts for various products and designing a barter chamber as well as
security system.
The
activity of insurance companies, the method used for providing necessary
guarantees in the market, methods used for delivering goods to purchasers as
well as how to use e-commerce are the issues of importance for the
establishment of the trading floor.
It seems
that implementation of the swap plan for daily exchange of 120,000 barrels of
oil from Caspian countries, which can be increased to 370,000 barrels, as well
as the establishment of Baku-Tbilisi-Ceyhan pipeline and transfer of oil and
gas from Caspian littoral states and Iraq to the Eastern Mediterranean region
would provided good conditions for transacting oil products with those
countries, which can add to prosperity of the trading floor for oil, gas and
petrochemicals.
We must
not forget that according to the current regulations at the oil market, only
those parties that would gain the approval of board of directors of the
National Iranian Oil Company will be able to be listed as purchasers of oil
and its products. However, during preliminary studies on establishing a
trading floor, the possibility of presence of various groups to forward
purchase proposals on the said products would be studied.
Assemipour stated that the presence of various companies on the oil products
trading floor would be optional and all companies active in the field of oil,
gas and petrochemicals that have been approved for presence in the hall, could
attend its dealings although performance of the country’s oil products market
would provide necessary motivation for presence of such companies in the
trading floor.
In fact,
inauguration of an oil, gas and petrochemicals trading floor and eventual
establishment of an oil bourse will do away with monopoly of special
purchasers in the market and the Iranian investors would enter oil products
trading market for the first time in the history of the Iranian oil industry.
At the
same time, the fact that most Persian Gulf countries follow suit with
controlling policies of OPEC, could be an inhibitory factor for determining
the oil price as a price index in a bourse, which has so far precluded
establishment of an oil bourse in the region, because imposing controlling
policies would prevent oil price from being set in a free market based on
supply and demand. Also, OPEC members emphasize on specific destinations for
selling their oil and most of them do not sell their oil for free destinations
while oil purchasers in a bourse must be capable of transferring oil to any
destination that they deem expedient. All this limitations should be taken
into consideration to make an oil, gas and petrochemicals trading floor more
efficient.
Regional
developments and the possibility of establishment of regional markets in the
Persian Gulf has prompted some experts to opine that inauguration of an oil
bourse in Iran would be a decisive factor for more coordination and
cooperation in line with more controls over oil price. They assess an oil
bourse as an inhibitory tool for preventing oil price fluctuations whose
success would depend on regional pacts with new economic orientations and
meeting the interests of member countries. However, we must not forget that
investors’ enthusiasm about the bourse requires political stability in Iran to
make it a good carrier for aggregation of domestic and foreign capitals.
Critics
of an oil bourse, however, do not believe it to be capable of attracting
foreign capital and opine that political developments and conditions in the
region would prevent attraction of investments. They are of the opinion that
investors’ enthusiasm about the bourse would depend on profitability and
security in the region and suitable grounds for investment in the country
would be only provided when Iran establishes relations with other countries on
the basis of a logical political diplomacy in line with its national
interests.
Assemipour believes that, “Studies for the establishment of an oil, gas and
petrochemicals bourse, despite high costs of procuring installations as well
as information and computer apparatus could pave the way for shaping primary
plans for the establishment of other commodity bourses and eliminating
probable shortcomings with the stock exchange.
He hoped
that the Fourth Economic Development Plan would consider a specific article in
the section on financial markets for the establishment of an oil bourse. |
