The Forum for Partners in Iran's Marketplace

August 2011, No. 61

Exclusive 16th International Oil Show

Oil Show Reflects on
Failing Sanctions

Managing director of Total E&P Iran Co. believes that Iran sanctions will damage global economy in the long run.

An overall analysis will prove that Iran sanctions have failed and the taboo has been shattered. Of course, their possible threats and structural weaknesses of the Iranian oil industry should not be overlooked. Although Iranian statesmen have clearly indicated that they are serious in negotiations to attract foreign investment to Iranian oil industry, negotiations have not been generally successful and, perhaps, a reason for that failure is weak performance of Iran's oil diplomacy. The following is a summary of viewpoints provided by foreign guests and participants in the 16th International Oil, Gas, and Petrochemicals Exhibition in Tehran.

Managing director of Total E&P Iran Co. believes that Iran sanctions will damage global economy in the long run. Bernard Sudreau, managing director of Total E&P Iran Co., added that Iran enjoys an important position in the world because of its huge oil and gas reserves. He added that if investment in the Iranian oil and gas industry stopped right now, its impact on the global economy would be evident in 5-6 years.

Managing director of OMV in Tehran noted that his company has taken part in the oil exhibition to indicate its interest in continued cooperation with the Iranian oil companies. He said that OMV has been a regular presence in the exhibition throughout the past 10 years to present its capabilities. Thomas McCulloch stated that annual presence of his company in oil and gas exhibitions in Tehran proved that the company did not care for Western countries' sanctions against Iran.

Manager of a Chinese company also noted that sanctions imposed on Iran by the United States and the West have not barred China's CNLC company from cooperating with Iranian oil companies and its officials were bent on developing good relations with the Iranian oil industry.

Po Ming Chuan, deputy director of CNLC, which is affiliated to China National Petroleum Company (CNPC), added that rich oil and gas reserves in addition to the existing potentials for developing the country's oil and gas industry will help Iran promote its status in global energy markets. He said Iran was a safe place for investment, emphasizing that there are many opportunities for the expansion of bilateral cooperation between Iranian and Chinese oil companies.

Po Ming also stated that Iranian specialists in oil industry can exchange their experiences and technical know-how with foreign companies in order to achieve self-sufficiency in manufacturing oil industry equipment and compete with foreign rivals.

Meanwhile, managing director of a Dutch company noted that he saw bright outlooks for cooperation with the Iranian oil industry. He added that Western sanctions have not affected cooperation between Iranian companies and Krohen Company which was determined to continue cooperation with Iran for the procurement of equipment needed for implementation of oil projects.

Managing director of Rongsheng Machinery Co. from China stated that rich oil and gas reserves in Iran have increased enthusiasm of international oil majors to invest in the Iranian oil industry. Gohyuan added that Iran was a good market for selling oil equipment manufactured by Rongsheng Machinery Co. and due to its rich oil and gas reserves, the Iranian oil industry was a very attractive investment opportunity for foreign companies.

Managing director of South Korean Metal Korea Co. stressed that sanctions have been ineffective and Korean oil companies continued to work with Iran. James Han added that given the increasing number of oil, gas and petrochemicals projects in Iran, Metal Korea Co. could closely cooperate with the Iranian counterparts for procurement of oil industry equipment. He emphasized that there are good relations between Iran and South Korea and Korean companies cooperated with Iran in various fields regardless of the Western sanctions. They had no problem with financing transactions with Iran. The manager of the Korean company also pointed to huge oil and gas reserves of Iran and added that many oil consuming countries including South Korea had to cooperate with Iran and this issue will raise Iran's importance in international markets. James Han also stated that the interest Iranian specialists show in achieving self-sufficiency in technical know-how and manufacturing equipment, promised a bright future for the Iranian energy industry.

An official of a Russian oil company stated that there is high enthusiasm for cooperation with Iran in upstream and downstream oil projects. Official in charge of the international section of Zarubezhneft Co., a state-run oil company, stated that his company was fully ready to work with Iran in all upstream and downstream projects. He added that the company was opening a Tehran office in order to work in oil exploration and drilling as well as designing and building refineries. He said in negotiations with the Iranian delegates, solutions have been found to thwart Western sanctions and provide necessary parts and funds for Iran by the Russian companies.

Representative of the state-run Qatar Petroleum Co. opined that Iran will turn into the biggest exporter of petrochemicals in the Middle East. Abdurrahman Ali Abdullah, director of trade and business section of Qatar Petroleum, added that western sanctions against the Iranian oil and gas sector have been ineffective and despite intensification of pressures form the west, activities in various oil, gas and petrochemical projects are going on in Iran. Referring to Iran's petrochemical projects to increase the country's share of the world markets, he noted that when the underway projects are finished, Iran will be among the biggest producers and exporters of petrochemicals in the Middle East.

Hassan Kazemi, member of the Society of Iranian Petroleum Industries Equipment Manufacturers, pointed to capacities of the Iranian private sector in oil industry, saying that during 2010, members of the Society procured 6 billion dollars of equipment. "However, if the figure is compared with production growth in automobile industry and achievements of Society of Iranian Car Exporters, it will seem small."

He added that sanctions provided Iranian statesmen with a new opportunity to attach more importance to quality and quantity of domestic products.

"However, we can always complain that when officials can buy a commodity from abroad, they ignore domestic industry and products. When there are sanctions, they turn around and focus on domestic production and industry and this is a major weakness for the Iranian industries," he added.

Kazemi stated that to reduce impact of sanctions, they have proposed to the Ministry of Petroleum to let the Iranian private sector manufacture and procure those commodities which can be produced inside the country due to availability of technology and manpower.

"This can be done by establishing domestic consortiums and concluding contracts with the private sector," he added.

The official noted that out of about 30 billion dollars of equipment needed for the implementation of the Fifth Economic Development Plan, more than 15 billion dollars of equipment can be manufactured in the country, but at present, only 6 billion dollars of equipment are made in the country.

He added that support for domestic production was a major challenge facing the Iranian oil industry.

Kazemi stated that the most important problem troubling domestic manufacturers was the absence of a large-scale strategy for development of domestic industry.

"We have made many efforts to formulate that strategy, but domestic manufacturers are not properly supported in our country. On the other hand, Chinese companies have entered our market in the past 2-3 years and have caused us suffer heavy losses," he added.


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  August 2011
No. 61