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Iran approves new oil contract model

Publish Date: Wed, 03 Aug 2016 19:26:39 GMT

Iran approved an outline for a new oil contract model, taking the OPEC member a step closer to welcoming foreign investment in its energy industry and boosting production even more into an oversupplied market.

The outline was approved at a cabinet meeting Wednesday, reported Bloomberg citing IRNA.

Priority will be given to boosting production from jointly owned oil and gas fields, according to state radio quoting Oil Minister Bijan Namdar Zanganeh.

 The government wants to lure international oil companies that can make long-term investments worth billions of dollars and bring cutting-edge technology into the country after sanctions that restricted its crude supplies were eased in January.

Big oil companies such as Italy’s Eni SpA and France’s Total SA have expressed an interest in developing Iran’s oil and gas fields. Iran has been working on the oil contract model for the past two years.

The country hopes companies will invest as much as $50 billion a year. It’s already succeeding in meeting its pledge to regain market share it lost due to the illegal sanctions.

Production was 3.55 million barrels a day in July — ۲۷ percent higher for this year and the most since December 2011 — according to data compiled by Bloomberg.

“Any process is going to take time and a lot of steps before any investment goes into the ground,” Edward Bell, commodities analyst at Emirates NBD in Dubai, said by phone. “This isn’t going to be a step change in the way markets are going now.”

Brent crude prices fell 15 percent in July amid a growing recognition the global surplus of crude will take time to clear. Iran seeks to reach an eight-year high for daily output of four million barrels by the end of 2016, with foreign investment helping it regain the position as OPEC’s second-largest producer. It was third-largest in July, according to data compiled by Bloomberg.

The new contract model was approved in a cabinet session presided by President Hassan Rouhani. The Oil Ministry will review each contract to be signed with potential new investors, including details on price, duration and other terms of the project, according to state radio.

PSA finalizes €۴۰۰m joint venture with Iran Khodro

PARIS–(BUSINESS WIRE) — The PSA Group and Iran Khodro signed the final joint venture agreement on Tuesday to produce latest-generation vehicles in Iran. This 50/50 joint venture is expected to invest up to €۴۰۰ million over the next five years in manufacturing and R&D capacity.

The agreement not only marks the beginning of a new chapter in the two partners’ history but will also open up new possibilities for customers in Iran, who will be offered vehicles built to the highest comfort, safety and environmental standards in this long-standing Peugeot market.
Commenting on the agreement, Jean-Christophe Quémard, Executive Vice-President, Middle East & Africa, said: “Today marks a crucial milestone in our project with Iran Khodro. The two partners conducted discussions as announced during President Hassan Rouhani’s visit to Paris in January 2016. I am proud to be bringing the best in PSA Group technology to our Iranian customers.”
This investment will contribute to the development of a competitive manufacturing base for producing, launching and marketing Peugeot 208, 2008 and 301 models, fitted with latest-generation engines.
The agreement provides for the creation of a joint venture on an industrial site in Tehran to produce new latest-generation Peugeot vehicles, on a platform that will also be used by Iran Khodro to develop its own vehicles, the capacity to export joint-venture products across the region, and the restoration of contractual relations for the production of Peugeot-branded vehicles currently sold in Iran.
The first vehicles will roll off the production line at the Tehran plant in the second half of 2017.
The Iranian market reached a peak of 1.6 million vehicles in 2011. It should quickly regain this level and reach 2 million vehicles a year by 2022. Current estimates put the number of Peugeot cars on the road in Iran at more than 4 million.
Iran is a key component of PSA’s development strategy in the Middle East & Africa region, which is the PSA Group’s third-fastest growing international market.
(Source: businesswire.com)

Azerbaijan, Iran mull three options for financing railway construction

Azerbaijan and Iran are considering three options for financing the construction of the Rasht-Astara railway section of the North-South transport corridor which is to connect northern Europe to Southeast Asia, said an Azerbaijani official.

Head of Azerbaijan Railways CJSC Javid Gurbanov further told ANS TV channel that the construction of the Rasht-Astara railway section is worth nearly $900 million, according to estimates by the Iranian side, reported Trend News Agency.

He added that the Azerbaijani side has yet to conduct studies on these calculations. “We have asked Iran to provide us documents on the project, and we will submit it to the ministries of finance, economy and emergency situations of Azerbaijan,” Gurbanov said.

“An evaluation will be conducted, and its results will be presented to the president of Azerbaijan. The Azerbaijani side expressed its readiness to provide financial support to Iran in the construction of this section.”

He noted, “Iran’s President Hassan Rouhani is to visit Azerbaijan on August 8-10, and until that time, we will try to prepare the necessary documents and protocols to provide financial assistance regarding this section, and these protocols will be signed between the two countries once the president of Azerbaijan approves them.”

Gurbanov however added that the form of financing sources depends on the outcome of the negotiations.

“It will depend on the conditions of the agreement whether the sources of financing will be in the form of a loan [which will be provided by Azerbaijan] to Iran, whether Iran will attract a foreign loan or it will be a loan attracted within the country.”

He said, “All the three options are being considered, and the one which suits the two sides will be chosen.

“Iran wants the companies of the two countries to work together and on equal rights. However, there are options of working within a joint venture or holding an international tender.”

The Qazvin-Rasht-Astara railway, a part of the North-South transport corridor, will connect the railway networks of Iran, Azerbaijan and Russia.

Initially, three to five million tons of cargos per year will be transported via the corridor, and this figure will increase to 10-12 million tons in the future, according to preliminary estimates.

Over $1.5b earmarked for non-oil exports, development projects

Of the mentioned fund, which was earmarked by the board of trustees of the National Development Fund (NDF) on June 7, 25 trillion rials (about $721 million) was allocated as facilities to the promotion of non-oil exports and 30 trillion rials (about $865 million) was allocated as the floating capital to the implementation of development projects in the agriculture and industry sectors.

The government had previously notified an incentive package for the support of non-oil exports and the fund allocated by the NDF is expected to flourish exports of non-oil goods.

Iran’s non-oil exports value with a 20% increase is planned to reach over $50 billion in the current Iranian calendar year (which will end on March 20, 2017), IRIB quoted Iranian Industry, Mining and Trade Minister Mohammadreza Ne’matzadeh as saying on May 28.

Mentioning that 32 countries have been already determined as export targets, the minister added, “According to the policies of resistance economy, comprehensive and goal-oriented support of exports and exporters is emphasized.”

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