Iran Press Service


Tehran, 1st June (IPS)

The Islamic Republic of Iran for the first time "confessed" that it faces severe shortages in the oil industries, both in term of technology and investments as well as qualified technicians and has no other choice but to invest heavily if it wants to keep with its position as a leading oil producer.

The dramatic " acknowledgement" came in form of a rather unprecedented article carried by the official news agency IRNA, saying that "lack of access to modern technology and scarcity of funds, both in hard currency and Rial (the local money) for the implementation of development projects have deprived the country of the potential of optimising its capacity to produce oil in recent years".

With a total production of 3,9 millions barrels per day, Iran is the OPEC's second largest producer after Saudi Arabia and to keep the production at this level, the country needs more than 10 billions US Dollars of "immediate" investments.

Observers said the "mea cupla" could be "inspired" by President Mohammad Khatami himself as a program for the new reformist-dominated Majles (parliament) to proceed with important changes in the present disastrous oil laws and policies that forbid foreign investments in the vital energy sector.

According to the quite well documented article, in order to preserve its 14.3 percent share in the OPEC production ceiling and in the light of its effective role in meeting the soaring global demand for energy, Iran should at least make a Dlrs 3 billion investment to increase the production capacity and another Dlrs 2.5 billion for compensation of the production fall in some oil wells to the level of 200,000 to 250,000 barrels per day.

But Iranian oil experts says that not only the immediate need for investment in the oil and gas industries are much higher but the existing political situation and laws, particularly for the energy sector are "irrevocably irreconcilable" with modern economy.

It is exactly for this reason that the commentary calls for an "end to the wrong concept that inviting foreign investors or concluding agreements with foreign firms for the development of oil fields implies to losing sovereignty and national ownership over such resources".

"Therefore, the study of domestic and foreign aspects of absorbing foreign investment and acquiring modern technology, calls for the reform of certain regulations and outlooks in this connection. Through holding constant sessions with law, international law, oil and industry experts, the government should find proper mechanisms for absorbing foreign investment in the oil industry", the article further hinted, noting that buy-back scheme is "neither the last nor the least means to absorb foreign investment in the Iranian oil industry".

According to the current laws, Iran accepts no foreign participation and investments in the development and exploitation of onshore oil fields while offshore projects are carried out under an outdated system called "buy back" that benefit more foreign firms than the country, as the investors impose the drastic conditions.

The "buy-back" system was denounced by Dr. Parviz Mina, a Paris-based international oil consultant and a former Director of the National Iranian Oil Company (NIOC) as a "disastrous fouls law" that had "dangerously" damaged the industry.

"Moreover, structural and legal problems as well as various political views have hindered the timely investment needed in the oil industry", the article said, cautioning that "studying the issue of investment from its foreign perspective will shed further light on its sensitivity".

Until now Iran would always boast that the sanctions imposed by Washington had no effect on the development of Iranian oil industries and that the country had been able to "rub the noise of the Great US Satan to earth" thanks to major European oil giants, chief among them the French Total (now ElfTotalFina).

Commenting the surprising article for Iran Press Service, Dr. Mina said because of restrictive laws, no agreements had been signed by the Islamic Republic with foreign companies for exploitation of new fields and the few ones that exists concerns modernisation and development of existing reserves.

He said at least ten billions of Iranian oil reserves were "unworkable" because of lack of modern technology in the one hand and drilling and producing with old machinery on the other.

"The use of outdated technology in the development of oil field not only will increase the time period for production but will also damage reserves", the article confirmed.

There are at least 40 newly discovered onshore oil fields that are not exploited yet and exploitation with old methods and the lack of modern gas injection technology has "killed" a great number of oil wells, according to Iranian oil experts.

"Development of fields demands a huge investment and modern technology but the eight-year war (with Iraq between 1980-88), the imposition of trade sanctions against the country and the various obstacles in international relations which emerged since the 1979 triumph of the Islamic Revolution have deprived Iranian oil experts of access to modern technology in the field", the commentary said without mentioning the United States that maintains an oil embargo against the Islamic Republic.

"This is what we are saying for the last ten years but no one in Iran would listen. Now it seems that the situation has reached the point of catastrophe", observed Dr. Shahin Fatemi, a Professor of Economy at the American University of Paris (AUP).

To pave the way for changes, the article tells the Oil Ministry to see how other OPEC (Organisation of Petroleum Exporting Countries) producers, particularly those in the Persian Gulf are doing.

"To this end, the Oil Ministry should make a technical and expert study of all the agreements that OPEC countries have signed with foreign firms for the development of their oil and gas fields and make use of their experience", the article recommended.

What is even more dramatic in the IRNA warning is the avowal that the country is also lacking competent personnel, that against the officials, including the present Oil Minister Bizhan Namdar-Zanganeh who would always state that not only did not need foreign experts, but also was an exporter of oil technicians.

"It is a fact that the country's skilled and experienced manpower in the oil industry cannot meet the current demands of the industry and, thus, development projects on oil and gas fields cannot be implemented on time and at the required speed, (for) oil industry personnel in Iran have not received the needed specialised training in the past 20 years and tend to rely on their past knowledge", the commentary acknowledged.

Dr. Hasan Mansur, also a Professor of Oil and Economy at the AUP and a former Oil adviser to the Swedish Government said the Oil Ministry under the Islamic Republic had never a sustained educational program and did not form up to date experts and technicians to keep up with the fast growing and changing modern oil technologies.

Both Dr. Mina and Dr. Fatemi pointed out that if Iran did not quickly change the present laws and attract much needed foreign investments to modernise the oil industry, it will soon lose its place as the second OPEC producer to Iraq as soon as present international sanctions imposed on this country are ended. ENDS OIL SHORTAGE 1600

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