Fuelling concerns

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Iran’s hydrocarbon industry is the lifeblood of its economy, but recent political disruption has put the country back a step in its bid to attract badly-needed Western investment.

As the world watched chaos unfold a month ago on the streets of Tehran when thousands marched in protest at the disputed presidential elections, the sacking of the deputy oil minister went virtually unnoticed. Akbar Torkan, a prominent, post-revolution political figure and a staunch ally of the former president Hashemi Rafsanjani, who has been vocal critic of Iran’s incumbent leader Mahmoud Ahmadinejad since losing to him in the 2005 elections, was the victim of a political sacking.

Evidence pointed to the fact that Torkan’s sudden removal, as tensions ran high after the bitterly contested election result, was because he had ties with opposition. More acutely, it showed that the political upheaval had spread into Iran’s energy industry.

The post-election violence has come at a bad time for Iran’s oil and gas sector, which desperately needs to attract investment from Western players if it is to unlock the potential of its vast reserves.

Global oil companies have always been wary of investing in Iran, but the recent unrest has renewed their fears.

‘It’s definitely a setback for Iran’s oil aspirations,” says Bobby Sarkar, analyst at Dubai investment bank Al Mal Capital. “It [the election troubles] hinders or lowers Western interest in Iran. Investors would be hesitant about committing capital given there is so much uncertainty going on there.”

“The political risk has increased. You’ve got to wonder how committed and willing these NOCs [national oil companies] are going to be, in making one, two, three billion dollar investments there, when the system has been rocked in recent weeks,” agrees Raja Kiwan, a Dubai-based oil analyst at energy consultant PFC Energy.

Indeed, there are already signs that the election unrest has taken its toll. At the end of last month, Austrian gas group OMV said it may postpone plans to invest in phase 12 of the massive South Pars offshore gas field citing political concerns.

Currently, there is no Western company directly involved with oil exploration and production in Iran. The most recent deal was in the 1990s, when Shell was involved, a period when there was relative political stability. In the years since, US sanctions against Iran over its refusal to halt its nuclear programme have driven away the few Western firms that were involved in physical exploration, or had any major investment.

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