Challenges Facing Iran’s Petroleum Industry

 

News Analysis - Source: Eghtesad and Energy

 

Tehran, January 11, 2010 (Hamsayeh.Net) - The prevailing bureaucracy in Iran’s petroleum industry is the most well established modern bureaucracy in the country, which is both rational and technical and shuns politics seriously.

 

In recent years, however, procedures in the petroleum ministry have been fully politicized and this is most vividly demonstrated in selecting and appointing its managers. When politics triumph in an entirely technical ministry, creativity and boldness shy away. Such a phenomenon is nothing short of poison for an industry that is in serious rivalry, in both oil and gas domains, with countries like Saudi Arabia, Russia and Qatar where all issues are seen as pure technical.

 

Accusing the industry to be generally run by Mafia without any specifics has only warded off courage and creativity of the personnel for fear that they would be  accused of cooperating with that Mafia.

 

The petroleum industry has to be run on the basis of trust and confidence instead of skepticism and tension that has prevailed in the industry in recent years. Such an atmosphere in the industry when it is faced with complications on the international scene, such as threat of banning sale of gasoline to Iran, only helps exacerbate the working conditions in it.

 

On the other hand, development in the petroleum industry is unable to get by without technology and investment. Sanctions against Iran have practically scared away Western technology and investment and have forced the petroleum ministry to resort to negotiations with Russian, Chinese, Indian and Malaysian companies for the purpose.

 

This will unquestionably lead to lower technical standard and drop in the production of both crude oil and natural gas in Iran. In the past decade or so, numerous privately run contractors and manufacturers of equipments used in the petroleum industry have become involved in the industry’s projects and expect the government to create conditions conducive to working.

 

These conditions include setting rules to safeguard interests of the private sector, holding tenders on fair basis and allowing evenhanded situation for competition between state-run companies and those of the private sector.

In sharp contrast, the policies of the government have only limited the scope of work for the private sector in Iran’s petroleum industry during the past years.

 

Adopting a suitable legal frame for developmental contracts is another challenge Iran’s petroleum industry has been faced with. Although in recent years Iran’s standard ‘Buy-Back’ mode of contract has been revised to an extent, ostensibly it has not provided adequate incentive for foreign companies to rush for projects in Iran.

 

Taking on the numerous challenges facing Iran’s petroleum industry now and in the coming tough days needs selfless, resourceful and bold managers, who have been brushed aside in recent years.