Wealthy Nations Daily Update - Iran

After years in the international wilderness Iran was finally brought back into the fold in July this year. The agreement reached between Iran and six world powers – the 5+1 of China, France, the US, Russia, the UK plus Germany was for Iran to scale back its uranium enrichment programme in exchange for an end to the economic sanctions that have crippled the economy for years. The 5+1 term refers to the UN Security Council's five permanent members plus Germany. Not all the international community was happy with the deal, with Saudi Arabia and Israel being particularly vocal with their opposition. Israel's Prime Minister Benjamin Netanyahu said the deal posed a grave danger to world peace saying "Unleashed and unmuzzled, Iran will go on the prowl, devouring more and more prey," adding "In the wake of the nuclear deal, Iran is spending billions of dollars on weapons and satellites. Do you think Iran is doing that to advance peace?"

Now according to the BP Statistical Review of World Energy 2015 Iran has the largest proven gas reserves globally with over 18% of the world total (as well as the fourth largest oil reserves). Despite these massive reserves the biggest problem is the need for investment, and lots of it. As it stands at the moment 56% of all oil extracted is consumed domestically, although this pales into insignificance when compared to the 97% of all gas consumed domestically. Estimates are that it will take anywhere between USD30bn and USD50bn of additional investment in Iran over a minimum of the next 5 years for the Middle East country to start to see substantial benefits from the sale of oil and gas.

Now rather than a headlong rush to invest in Iran the large western oil and gas companies seem to be taking a more cautious approach. One of the reasons being in light of the current oil prices most of the oil giants are cutting investment in new projects and still see Iran as more of a risk than other parts of the world. It was only Thursday of last week that Shell announced its biggest nett loss in at least 16 years resulting in a charge of almost USD8bn. However Iran itself is more likely to look east according to Mona Dajani, a senior legal practitioner at Baker & McKenzie. Speaking at the Baker & McKenzie Global Oil & Gas Institute in Houston earlier this year say said “In making overtures to China, Russia and seeking project partners in Pakistan, it is broadly evident that Iran is seeking cooperation elsewhere when the sanctions are lifted.” 

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