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Out of OPEC, Qatar can start to market Iran’s oil to Asia, Europe (Exclusive)

After withdrawal from OPEC, Qatar can start to market Iranian oil to Asia and Europe, Sam Barden, director of the international trading and consulting company SBI Markets, told Trend Dec. 4.

This decision is a politically and economically right thing to do, he said.

“There is absolutely no benefit to Qatar to remain a member of OPEC,” he noted. “Firstly, they are a small oil producer in comparison to others in OPEC, and the time needed at the ministerial and executive level to maintain OPEC relations doesn’t match the benefit gained.”

“Qatar will and should focus on gas over oil, as gas has a much bigger future than oil globally,” he said. “Qatar, as the largest producer of LNG, is also the host of the Gas Exporting Countries Forum (GECF), an 11 member global organization, sometimes referred to as the Gas OPEC. Given Russia is a member of the GECF, but not OPEC, and is also one of the largest procurers of gas and oil, Qatar can now deepen cooperation with Russia, and also Iran.”

“Strategically, and moving forward, this makes much more sense politically and economically, as Russia and Iran, along with China and other parts of Asia, are likely to move away from US dollar settlements and trade in an effort to remove sanctions risk,” he noted.

“Qatar can now start to market Iranian oil to Asia and Europe, and this could dramatically increase supply, or take market share from others,” he added.

“A move like this could be coordinated with Russia and China as part of the overall strategy to fund and build the Belt and Road Initiative, which is the largest infrastructure project on the planet,” he said.

Such actions will more than likely fasten the collapse of the US dollar trading system, which is a good thing for future peace and free trade in the world, Barden noted.

Feature Oil & Gas

Iran’s oil sector has greater chance to absorb foreign investment- director of SBI Markets

By Dalga Khatinoglu – Trend:

A senior energy expert believes that despite a huge decrease in global upstream oil and gas sectors, Iran has a better chance of absorbing foreign investments than other oil producers.

Iran has announced that $185 billion investment is needed in its upstream oil and gas sector, as well as $70 billion in petrochemical and $200 billion in optimizing energy consumer sectors to halve its energy intensity, which is two times more than global averages.

This is while, according to OPEC’s estimation, OPEC would need to invest an average of close to $40 billion annually in the remaining years of this decade. This figure was $120 billion in 2014 or three times more than the annual investment amount. However, according to Wood Mackenzie’s estimations, the plunge in oil price since last summer caused the suspension of 46 big oil and gas projects. The worth of suspended projects in 2015 is estimated to reach about $200 billion.

Sam Barden, the director of SBI Markets, an international commodity trading and advisory company which advises governments and private firms on deal financing and facilitation told Trend July 30 that Iran will be more successful than other producers in a low price oil environment, as the availability of cheaply extractable oil and gas in Iran and Iraq, will mean that Iran could indeed receive a disproportionate amount of future investment, as more expensive extraction countries are wound back in favor of investment into Iran.

The cost of oil production in Iran’s onshore sector, which shares 70 percent of total reserves is about $7 per barrel, but regarding the fact that more than 80 percent of Iran’s operative fields are in their second half-life, this figure is high.

Currently, the cost of producing 3 to 3.5 million barrels of oil in Iran’s active fields is $10 billion annually, mostly due to re-injection of 93 million cubic meters per day of gas to old oilfields, while this figure would reach $50 billion in next 10 years.

Iran and P5+1 reached a comprehensive nuclear deal on July 14, but the implementation of this deal depends on Iran-IAEA (International Atomic Energy Agency) cooperation around some suspected activities. Iran says the sanctions would be removed in four to six months.

While European delegations from Germany visited Iran and delegations from France, Italy, Austria, UK and Poland are to visit this country to discuss economic ties, Iran hopes to attract tens of billion dollars in oil and gas sector.

“There is no doubt that European investment into Iran will be the first, ahead of US. The simple trade will be the exchange of technology from Europe for the opportunity of market share in Iran for European large companies. Given Iran has been “closed” to International investment for so long, there is no limit on which industry’s Europe might want to partner or invest into Iran in. Of course Oil and gas sector will be top of the list, however I would expect European investment into the car industry, for parts and manufacturing, into the airline industry, to begin the long needed upgrade of Iran’s aging jet liners with modern European made passenger jets, into large scale infrastructure such as road and rail, into energy efficiency such as renewable energy or much more efficient gas fired electricity generation, and of course into the banking and stock market services sector generally”, Barden said.

UNCTAD estimated that EU’s outflow direct investments in 2014 was $250 billion.

The director of SBI Markets said that “I think it is hard to estimate how much Iran can absorb (investments). This is where the risk really lies for the Iranian economy, in that a flood of capital could create bubbles in asset classes. I think the key here is how investment flows into the oil and gas sector. If it is in the traditional sense, through banks, then the risk could be increased as the Iranian banking sector is one area which needs modernizing. There are lot of banks in Iran, but not much banking”.

Iran had also defined a long-term (20-25 years) new model contract that it calls its integrated petroleum contract (IPC) to replace the old, less popular buyback agreements to attract foreign companies. However, it’s not clear whether IPC could compete with production sharing agreements (PSA) that is popular with companies, but is banned in Iran.

Responding to a question that “when the European investments can start to flow to Iran?”, Barden said that “when sanctions lift in early 2016. I think the risk to try and invest before is high, however I have no doubt that agreements for deals in the future are being arranged and agreed now”.

Feature Oil & Gas

Saudi arrests and possible collapse of petrodollar system

The recent high-profile arrests in Saudi Arabia are unlikely to have a long-term impact on world oil prices, energy experts told Trend.  Sam Barden, Director of SBI Markets, an international commodity trading and advisory company, believes that this can undermine Saudi Arabia’s reliability as an oil supplier.

“Saudi Arabia is becoming increasingly unstable politically and socially, and it is entirely likely that this instability will affect Saudi’s ability to be a reliable oil supplier. Some of the princes arrested may well have supply contracts in the market which may be renegotiated or interrupted,” he said. “Other suppliers in the market would likely pick up any slack in the oil market, and I do not see Saudi’s instability putting any upward pressure on the oil market.”

On Nov.4, a number of high-profile arrests were made in Saudi Arabia in the wake of the formation of a new anti-corruption committee headed by Crown Prince Mohammed bin Salman (known in diplomatic circles as MbS).

A formal list of those arrested has not been released, but according to reports, it includes prominent investor Prince Alwaleed bin Talal and former Finance Minister Ibrahim al-Assaf.

At the same time, a minor government reshuffle took place. Notably, Prince Miteb bin Abdullah, son of the late King Abdullah and once considered to be a future king, was sacked as head of the National Guard. Economy Minister Adel Faqih was replaced by his deputy, Mohammed al-Tuwaijri.

Against the backdrop of these developments, oil prices rose sharply on Nov.6. The price for January futures of the North Sea Brent oil mix has increased by 0.66 percent to $62.48 per barrel, while the price for December futures of WTI oil rose by 0.56 percent to $55.95 per barrel.

However, Barden said he doesn’t believe that the current situation will have a long term effect on oil prices.

“I think what we are seeing is the continued collapse of the petrodollar system, and the current moves in Saudi may be a reflection of their move away from the USD towards a system backed by Russia, China and Iran. In this regard, there is likely to be a systemic shift in how oil is priced, towards regional based multi-currency contracts, away from petrodollar system,” he added.

Edward C. Chow , Senior Fellow for Energy and National Security Program at Center for Strategic and International Studies, states that generally speaking, uncertainty causes oil prices to rise.

“Since what happened should have no direct impact on oil supply, I expect prices will come back down after a few days. The longer term implication for oil markets is harder to discern,” he told Trend.

Christopher Haines, head of oil and gas at BMI Research, (a Fitch Group company) for his part, told Trend that what happened in Saudi Arabia is very much a political move, so it will have little or no impact on Saudi oil production and exports – this will support the current Saudi policy to protect the oil price.

He believes that the impact on prices will likely be short-term, unless there is any kind of military concern relating to the missile fired from Yemen.