Iran business: Oil shake-out


The oil minister, appointed last September after the controversial re-election of Mahmoud Ahmadinejad as president, has made several changes at senior levels of the industry, the most recent and potentially significant of which has been the replacement of the head of the National Iranian Oil Company (NIOC). The changes appear to have further enhanced the role of the Islamic Revolutionary Guards Corps (IRGC) in the industry at a time when the government is relying more and more on internal resources to increase oil and gas production and develop the refining and petrochemical sectors.

The appointment of Masoud Mirkazemi as oil minister brought criticism from Iran’s parliament, but MPs did not press the issue, as the supreme leader, Ayatollah Ali Khamenei, had made clear that the regime should show a united front in the face of the extra-parliamentary protests at the conduct of the presidential election. The principal objection to Mr Mirkazemi was that he did not have direct experience of the oil and gas industry—he had been commerce minister in the previous cabinet, and had previously headed an IRGC strategic research centre. He proceeded to replace the heads of the national gas and petrochemicals companies, and, on April 25th it was announced that he had appointed a new head of the NIOC, Iran’s national oil company, replacing Seifollah Jashnsaz, an oil industry veteran who had been in the post since early 2008, with Ahmed Qalebani, who has a background in manufacturing. Mr Qalebani is a former head of Saipa, one or Ian’s main car producers, and for the past two years has been in charge of the Industrial Development and Renovation Organisation, a holding company and development agency, as well as serving as deputy minister for industry and mines. He is said to have close ties to Mr Mirkazemi.

Who needs IOCs?

No reason has been given for the change at the helm of the NIOC. It may simply be a matter of Mr Mirkazemi wishing to build up his own team of senior managers by including figures with whom he has worked in the past. However, the move could also reflect tensions within the industry over how best to boost oil and gas production in the context of Iran’s increased international isolation, which makes it difficult to procure and finance imported technology and equipment. Iran’s oil production capacity has remained stuck at about 4m barrels/day for several years, and although gas production has increased significantly, this is mainly thanks to the completion of a series of projects launched at the turn of the millennium (often after long delays). Moreover, much of the extra gas is needed for re-injection to sustain output from Iran’s mature oilfields.

Efforts to engage international oil companies (IOCs) in developing new fields have made little headway as Iran’s relations with the West have steadily worsened during the Ahmadinejad era. Domestic companies, including those affiliated to the IRGC (notably Khatam-ol-Anbia), have taken an increasingly prominent role in the industry, and the government has authorised the petroleum ministry to raise several billion euros worth of bonds to finance ongoing investment—the first such issue, if €250m (US$350m) took place in March, and a second tranche of €750m is due to be offered to investors soon (the buyers are thought to be mainly Iranian).

Mr Jashnsaz spoke recently of the risks that Iran would face if it did not manage to maintain the necessary levels of investment in the oil and gas sector. He said that foreign investment played a vital role, and if development of the sector slowed down the damage could be irreversible. The IRGC, by contrast, has made clear that it considers that Iranhas the domestic resources to carry out the required investment in oil and gas development, without needing to resort to foreign technology and equipment.

It is not clear where Mr Qalebani stands on this issue. While at Saipa he was involved in bringing to fruition a joint venture with Renault to produce Logan cars, which suggests that he is not on principle opposed to working with international companies.