Iran signs $1.35 billion oil, gas deals despite US sanctions

Iran has signed $1.35 billion of deals to process natural gas extracted at its oilfields and develop another oilfield in its resource-rich Khuzestan province, Ministry of Petroleum Javad Owji says.

About $500 million of the deals involves building facilities to capture the gas from East Karoun fields, Owji said Monday, adding the Persian Gulf Holding Company will also sign similar contracts soon to collect gas from West Karoun fields.

The National Iranian Oil Company (NIOC) also awarded an $800 million contract to local upstream contractor Dana Energy to develop the 2 billion-barrel Sohrab oilfield.

Iran's bid to stop flaring the gas extracted alongside crude oil at its fields has hit stumbling blocks as foreign companies have put their deals with the country on hold in fear of sanctions.

Owji said more contracts with the aim of ending gas flaring will be signed in the next few days.  

"By the end of this government, the fate of projects to collect gas flared at oilfields will be determined," he said.

Oil producing countries often burn or flare a certain amount of natural gas that accompanies crude oil to the surface which is too small to be recovered or pipelined to a processing facility. The phenomenon, however, emits hazardous air pollutants during the flaring of the associated gas.

Former Minister of Petroleum Bijan Zangeneh had once said Iran needed $5 billion in investment to stop flaring gas at its oilfields.

Under a 20-year deal, Dana Energy committed Sunday to produce 160 million barrels from the Sohrab field and raise production to 30,000 barrels per day.

Sohrab is one of the several fields straddling Iran's border with Iraq. It shares a reservoir with the 1 billion-barrel Huwaiza field in Iraq, which the country's state-owned Misan Oil (MOC) began to develop in 2017.

15 countries attending Iran expo  

Owji's announcement on Monday came as Iran’s 15th International Exhibition of Plastic, Rubber, Machinery, and Equipment (IRAN PLAST) got underway at the Tehran Permanent International Fairground.

More than 430 domestic and foreign companies from countries as diverse as China, Taiwan, and Italy are attending the four-day exhibition. Over 300 traders and company representatives from 15 countries are visiting the international event.

Addressing the opening, Owji touched on the petrochemical sector's crucial role in bringing in much needed hard currency at a time of the most draconian sanctions imposed on the country.

Over the past 10 months, he said, $10 billion of petrochemical revenues have been turned over to Iran's Forex Management Integrated System, locally known as NIMA, which the government uses to procure vital goods at concessionary foreign exchange rates.

“The petrochemical industry is less vulnerable to sanctions and has played an important role in meeting the country's foreign exchange needs,” the minister said.

Petrochemical products provide crucial boon to Iran’s derive to weather draconian US sanctions which mainly aim to dry up the Islamic Republic’s oil exports.

Iranian officials say the wide diversity of petrochemical products and huge international demand for them because of their quality and price make the industry unsanctionable.

The US imposed sanctions on Iran's petrochemical industry, including the Persian Gulf Petrochemical Industries Company (PGPIC) which is the country's largest petrochemical holding group and its network of 39 subsidiary petrochemical companies in June 2019.

It banned purchases of Iranian aromatic, olefin, and synthesis gas, and any of their derivatives, including ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol, and urea.

The Treasury Department said in a statement at the time that the sanctions aimed to choke off financing for Iran’s largest and most profitable petrochemical group.

Officials have said Iran's petrochemical revenues will top a record $20 billion in the current Persian year of 1400 which ends on March 20, 2022.

"About $14 billion of this will be in foreign exchange earnings and $7 billion in domestic sales, which is a significant record and this amount of income will be reached for the first time in the petrochemical industry," former managing director of the National Petrochemical Company (NPC) Behzad Mohammadi said in July.

Energy markets are closely watching Iran's negotiations in Vienna to remove illegal US sanctions on the Islamic Republic amid red-hot oil prices.

If the sanctions are removed, Iran could quickly export millions of barrels of crude and help to drive down the prices.

"If the global consumers, especially the big economies, are unhappy with the current price levels and supply volume, and find them against their interests, my best suggestion for them is cancellation of the US unilateral sanctions as quickly as possible, and opening the room for return of Iran's production with maximum capacity to the global markets," Owji said last week.

"Undoubtedly, the global market needs the additional Iran's supply. We are ready to increase our oil supply to the global markets as soon as possible."

Crude prices have rallied about 20% this year, with analysts warning they are likely to surpass $100 a barrel because of strong global demand.

Earlier this month, JP Morgan warned that Brent could rise to $125 per barrel as OPEC's spare production capacity falls to four percent of total capacity by the fourth quarter of 2022.   

On Monday, the prices settled lower on perceived signs of progress on the removal of the US sanctions on Iranian oil sales as negotiators returned to Vienna to resume their talks.

Brent crude settled down 58 cents, or 0.6%, at $92.69, Reuters reported. It session high of $94 was the highest since October 2014.

US West Texas Intermediate crude fell 99 cents, or 1.3%, to settle at $91.32 after touching $92.73.

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