When Mahmoud Ahmadi-Nejad came to power in 2005 oil executives quietly hoped the return of a hardliner would have a silver lining. They hoped his election would bring some order to Iran’s energy industry, allowing negotiations to progress after years of false starts during which energy technocrats and officials were constantly moved around, and few had the power or will to make substantial decisions.
Their hopes did not come to pass. Instead, the hardline positions in both Tehran (over the country’s nuclear ambitions and its impossibly tough contract terms) and Washington led to an environment in which not even France’s Total – the gutsiest of the big oil companies – could dare to invest.
This time around, the sentiment is a little different.
Few executives are expressing any hopes as they watch protesters stage the biggest demonstration since the revolution in 1979.
In its bid to develop its liquefied natural gas industry, Iran this month said it had turned to Chinese investors, who are presumably less worried about the wrath of Washington, thereby shunning the more easily influenced international oil companies, with which it has been negotiating for the better part of a decade. But even the Chinese are keeping quiet about the deals they have struck to develop the LNG project that had belonged to Total.
Meanwhile, Total and Royal Dutch Shell are telling Tehran they have not given up on their projects, despite their executives’ acknowledgements that investing today was too risky. So negotiations appear to be in a by-now-well-worn space: International oil companies are playing nice with the Iranians, trying to stall having to pull the plug completely, while keeping clear of making the kinds of monetary investments that would set off alarm bells – and possibly sanctions – in Washington and Iran is threatening to take the international oil companies’ projects away and hand them to less technically, but more politically able national oil companies.
As protests on the steets of Tehran continue, executives can do little but watch and wonder whether US President Barack Obama’s more measured stance towards Iran will allow for an eventual calming of relations – at least enough so that they can muscle back into the space Iran says is now reserved for the Chinese.
The political world of Iranian gas development (FT Energy Source, 08/06/09)