Waiting to lift embargo
Some European countries have already started direct talks with Iran's oil officials regarding future relations after the embargo on Iran is lifted. Shell, Eni and Russian Luke Oil companies have launched discussions both in Vienna and Tehran. American companies have not yet taken a step in this regard but they are on alert waiting by the second for the official announcement of lifting of the embargo on Iran.
The investments of international oil companies in this country dates back to many years. They always had their ups and downs throughout their longstanding history since year 1901 starting with the first concession; then the rest of the major American oil companies poured in followed by Royal Dutch Shell and Total of France.
As soon as the embargo on Iran is lifted, talks will be held regarding the future of oil and gas concession accompanied with eagerness from both parties to get together again. There will be long and tough series of negotiations but the price and rewards for both parties will be high.
Oil companies definitely have to pay all the outstanding financial dues back to Iran, which total to more than $100 billion in Asian banks. This amount is equal to the total future investments in the oil and gas sector of the country.
The challenge will be how fast the oil companies can manage to push more Iranian crude oil into the market. Can they reach one million barrels before 2017, produce 4.5 million barrels by 2025 and target 5 million barrels by 2030? These are the real challenges that both parties must address and figure out the cost.
Iran knows that it has huge oil reserves and can drill easy oil without causing any future risks including environmentally, unlike in the other parts of the world where drilling for oil can be difficult. It will also demand for more advance bonus payments of about $3 billion without taking into account the size of the concession area.
On the other hand, oil companies are keen to gain and enhance their oil reserves by all means for their long-term existence. It is cheap oil that does not cost more than $5 per barrel in total to drill. They had similar experience in Iraq and recently in Abu Dhabi so they have to give in and accept all of the Iranian terms. It will definitely be rewarding to both and ensure long-term experiences to understand each other fully.
Oil companies have all the necessary experiences by gaining access to some of the large easy oil sources in the world, which has made their balance sheet look very positive. Of course, their big money has to be spent but the reward will be bigger; the other side knows this quite well.
In the meantime, the market will simply wonder how low the oil prices will fall. Will it be by $5 or more per barrel?
The terrorist attack last Friday on our mosque in Kuwait, which for no reason killed 27 innocent people of all ages during the end of their Friday prayers, will not go unpunished. This savage act has united us again as one-man one-religion, showing the world that there is no room of terrorists on our land. We are all united. Exactly 20 minutes after the attack, our Amir stated very clearly, "The victims are not just my people but my sons". Our condolences to all of us for the death of our people!!!
© Arab Times 2015
