European oil majors hold Tehran talks

The full text of the report follows:

It is the first time international oil groups have publicly confirmed talks with Iran ahead of a possible nuclear deal with the west.



The meetings, which took place in May and June, are evidence of the growing interest among big oil companies in Iran, which boasts the world’s 

third-largest oil and gas reserves but which will need tens of billions of dollars of foreign investment to realize its ambitions to nearly double production by the end of the decade.



A Shell spokesman told the Financial Times that its officials met counterparts in Tehran this month to discuss outstanding debt owed to the National Iranian Oil Company for crude that had been lifted but not paid for. He added: 'They also discussed potential areas for business co-operation should sanctions be lifted.'



'We review our growth portfolio on a regular basis and do not exclude any countries that are open to foreign investment,' the company said. 



'Should future sanctions relief make that possible, we would be interested in exploring with the government of Iran what role Shell can play in developing its energy potential.'



Iran produces about 2.7m barrels of oil a day. But a report by Wood Mackenzie, the energy consultancy, to be published on Thursday, says that it could add 600,000 b/d of crude production by the end of 2017, assuming that it strikes a nuclear deal with the US and EU that lifts sanctions.



Western negotiators have given themselves until June 30 to seal a final, permanent accord aimed at curbing Iran’s nuclear program in exchange for the relief of sanctions on the Islamic Republic.



The longer term gains for Tehran from such a deal could be even greater, says Wood Mackenzie, which sees a rise in total output capacity to as much as 4.4m b/d by 2025. This increase, though, would require $50bn of foreign spending, it said.



It emerged on Wednesday night that Claudio Descalzi, Eni chief executive, flew to Tehran in May for talks with Iran’s oil minister Bijan Zanganeh.



The Italian oil major said Mr Descalzi had discussed 'the possibility of investing in Iran’s oil and gas industry again.'



Mr Descalzi 'reiterated [Eni’s] interests in Iran, provided sanctions were lifted and contract terms were mutually favourable,' the company said.



Iran has ambitious goals to increase its oil production capacity to about 5m b/d by the end of the decade.



Industry insiders say that in an effort to coax back foreign companies who pulled out in 2010, it is drawing up new contracts that would replace earlier and widely disliked “buyback” deals with more attractive terms treating foreign groups as joint venture partners rather than as contractors.



There would also be some flexibility on remuneration, giving foreign investors a rate of return that varies with the risks taken and the oil price, rather than a flat, fixed fee. Contracts would also run for longer, up to 30 years, according to Iran-focused consultancy Energy Pioneers.



'The Iranians are eager to bring back major oil players,' said Fereidun Fesharaki at consultancy Facts Global Energy. He noted that the chief executives of Shell, Total of France, Italy’s Eni and Lukoil of Russia met the Iranian oil minister in Vienna this month.



'The contracts look good to me,' Mr Fesharaki added. '[But] there is more work to be done. The aim is to make sure the terms are better than those offered by Iraq, Abu Dhabi and Mexico.'



Iran’s crude oil and condensate exports averaged 1.4m b/d in 2014, according to the US Energy Information Administration, down from 2.6m b/d in 2011, before sanctions. Iran’s main buyers in Asia, Europe and elsewhere replaced Iranian crude oil with barrels from other members of the OPEC producers’ cartel.



Oil prices would be likely to fall if more Iranian crude entered the market as a result of removal of sanctions. The EIA estimates that oil prices could drop by $5-$15 a barrel next year if sanctions against Iran are lifted.

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