There are huge opportunities for UK businesses in Iran’s power industry.
Siamak Adibi, Head of Middle East Gas Team at Facts Global Energy believes companies in Britain can provide their expertise in increasing the efficiency of power plants as well as implementing energy-saving projects.
Speaking to ELN at The Iranian Trade Conference this week, he said there are more opportunities for the wider European sector to invest in power projects rather than the upstream oil and gas industry.
Mr Adibi added: “The Iranian power sector is actually not a very efficient sector. Efficiency in most of the Iranian power plants are relatively low. For instance, for gas-fired power plants on average you have 30% to 35% efficiency which is almost half of what you see in European power plants. I think they would welcome international companies, especially for energy-saving projects in the power or industrial sector.
“European companies are always interested in environmental issues. I think that’s one of the areas they can work with Iranians is increasing efficiency and consuming less fuel for instance.”
He believes it would be less risky for businesses to invest in energy-saving projects in Iran as they can be wrapped up much faster compared to long term oil and gas investments.
He added the Iranian domestic gas market is “relatively big” and is a growing market but its role in the global market is currently not big at only 1%.
For the oil and gas industry, the main challenge is to make contracts attractive for the development and exploration of oil and gas fields, according to Mr Adibi.
The Iranian Government is therefore in the process of developing a new framework called the Iran Petroleum Contract (IPC) to attract foreign investment.
Around 50 projects are said to have been introduced so far for international oil and gas investment both onshore and offshore.
Manouchehr Takin, an independent international oil and gas consultant believes foreign oil companies are already keen to invest in the Iranian industry as the sanctions are gradually being lifted.
He told ELN: “Iran is a cheap, low cost reserve to develop and anywhere else the international companies are going are expensive. In the case of Arctic, Shell spent about $5 billion (£3.5bn) to $6 billion (£4.2bn) in the last six years and in the end they gave up with the price [of oil] having fallen.
“So Iran is an area the international companies see [as] feasible and economically very viable to invest. So that is the attraction for them.”
He said Iranian companies and the government are “hungry and thirsty” for international firms to bring in investment as well as new technologies in field operations.
Mr Takin added the IPC model brings many advantages for foreign companies as it provides a longer term involvement and has advantages for high risk projects.
He said: “Under the old framework, a foreign company would develop a project, implement and get the oil flowing and test it for three or four months and hand it over it to the local companies to operate.
“The problem with that is foreign companies complained they were not involved in the operation as if the field did not perform as expected and production fell, they didn’t know who to blame.”
Mr Takin went on: “Iran has large reserves of oil and gas and large resource base… There is plenty of room for everybody to continue exploration and get Iranian production of crude oil and natural gas to rise and rise. This is what the world needs.”
However he believes foreign investors to know “little tricks” when they plan to invest in Iran.
He claims international energy giants operated “very unfairly” in the past as oil was sold to them at a very low price, adding: “The Anglo Persian oil company did not make much profit so Iranian revenue was very low but other international giants benefited so much. There were other countries with similar deals which were also unfair.
“So in the psyche of the Iranian population, of Iraq, of Libyan people and so on, they all remember that. So there is this feeling that these are the same concessioners coming back. I think for an investor going to Iran, they should be aware of this.”