Nick Snow
Washington Editor
Sanctions by the US government and other international organizations, and difficulty conducting business with Iran have made several foreign firms withdraw from that country's oil, gas, and petrochemical arena, the Government Accountability Office said on Aug. 3.
Updating a 2010 report at the request of the US Senate Foreign Services Committee, the congressional watchdog service reviewed reliable open sources and identified 16 such firms that had commercial activity in Iran from January 2010 through May of this year, including 2 entities not listed in its earlier report.
It also found that 20 of the 41 firms listed in the 2010 report declared in their public reporting or in letters to GAO, which were also confirmed by the US Department of State, that they have withdrawn, or are withdrawing, from Iran's energy sector.
Iran's general economy relies heavily on its energy businesses. Oil accounts for 80% of Iran's total exports, according to the Central Intelligence Agency's 2011 World Factbook. "The recovery of world oil prices in the last year increased Iran's oil export revenue by at least $10 billion over 2009, easing some of the financial impact of the newest round of international sanctions," it added.
Iran's crude oil production is another matter. GAO said the US Department of Energy ranks Iran among the world's top three oil and gas reserves holders, and the country remains one of the world's largest oil exporters. But its oil production peaked in 1978, and has not been matched since because of a high natural decline rate in mature fields, limited investment, and sanctions, the report continued.
Investment needs
GAO cited an OGJ estimate that Iran's oil production could fall by more than 25% in the next 5 years because of falling energy investments there. It also noted that IHS Global Insight found that Iran's oil sector will require $25 billion/year of investments to maintain existing production, and considerably more to improve recovery rates that would raise production to 5.8 million b/d by 2015.
"However, IHS Global Insight and DOE report that Indian and Chinese state oil companies have increased interest in the construction of Iranian refineries, and Iran is looking to India and China to increase development of oil exploration and production," the report said.
It noted that of the 16 foreign firms active in Iran's oil, gas, and petrochemical sectors in the latest review period, 2 had US government contracts totaling $4 million in obligated funds. "In comparison, our 2010 report found that the US government obligated almost $880 million in contracts to 7 of the 41 firms having commercial activity in the Iranian energy sectors between 2005 and 2009," GAO said.
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