Foreign Companies Strike Hopeful Note at Iranian Oil Fair

As Iran’s 19th annual International Oil, Gas and Petrochemical Exhibition drew to an end in Tehran last week, it was hailed as a success by both organizers and participants alike. Though none of the European or American oil giants had taken part, there was a tripling of participation by foreign companies from countries such as Germany, Spain, Canada and Japan as well as the Chinese.

“This was the most successful annual exhibition since the Ahmadinejad government came to office 8 years ago,” said Akbar Nematollahi, the expo director and head of the public relations department of Iran’s Petroleum Ministry. Participation by foreign firms had fallen under the Mahmoud Ahmadinejad government. “The number of foreign companies alone went up to around 600 from 195 last year.”

Some western firms that had not participated for years were thrilled with the reaction they saw during the 4-day long expo. “Our experience in this year’s fair was so good that we’ve already decided to come back next year with more staff and a bigger stall,” Joachim Bund, sales manager of the German company Lewa, which produces industrial pump systems, said.

“We’ve seen extreme interest in our products from Iranian companies, both private and state owned,” said Alexandre Chtcherbakov, president of the Canadian Techno and Power Tools Inc., which produces advanced lithium batteries that are used in oilfield drilling. “This is very promising for the future.”

With the election of the moderate Hassan Rouhani as Iran’s President and the subsequent breakthrough in the nuclear talks in Geneva last year, many think that Iran’s oil and gas sector could soon once again be open to business with Western firms. “The world is realizing that a new government with a reasonable outlook is in power. There is an old hand back at the helm of Iran’s petroleum industry, and the westerners have got the message. Right now not only are we in talks with numerous European firms, but also three major oil companies from the United States have been in touch,” Nematollahi said, declining to name the American companies due to their request to remain unidentified at the present.

“There [are] nearly $90 billion of oil and petrochemical projects available for anyone who wants to participate. Should the sanction problem be solved, Iran’s Petroleum Ministry would welcome major European and American Oil Companies because they have higher technology and better management than Chinese or Indian firms.” Nematollahi added.

At the moment, Western firms can at the most do only limited business with Iran due to sanctions, but those that took part in the Tehran expo say they are positioning themselves for the possibility that things might change. “Focusing on the Iranian market is very important for us because we think with the new government in Iran, the sanctions are near the end,” said Juan Vicente Ortiz, a head engineer of Prematecnica, a Spanish firm which produces gas flares.

Even though the Geneva Interim Nuclear Agreement in November gave hope to a possible negotiated conclusion of Iran’s nuclear case, the hurdle of the sanctions regime means that none of the western firms are willing to commit beyond its bounds. The uncertainty will continue until—and unless—there is a lasting international deal on the country’s nuclear program.

“Iran is a big opportunity for us. We stand to triple our total business, but we are not selling anything to them right now,” said Chtcherbakov. “We are a Canadian company and we will not do anything to jeopardize our position. We will keep on abiding a 100% by the sanctions regime.”

“We’ve been working here in Iran from 20 years ago. However since the sanctions started we’ve had to leave the oil and gas sector completely, and the work in other fields has become the most complicated work we do all over the world,” said Bund, whose company is still selling equipment for power plants to Iran in spite of all the difficulties caused by the sanctions regime. “For every request we get, we have to first check with the German authorities which can take 8 weeks. Maybe one out of a hundred of these requests are approved,” Bund added. “Getting back into Iran’s oil sector after the sanctions are lifted is a number one priority for us, and we feel that something, some big steps are coming, but until it does, its business as usual, and it has never been as hard as it is right now.”

In spite of the positive signs from the ongoing nuclear talks, the outcome is far from certain. Should the negotiations ultimately fail, the opening both sides are anticipating will not materialize. “I hope that the nuclear diplomacy will get results, because only then will our energy diplomacy have a chance,” Nematollahi concluded.