Year One after Sanctions: the Opportunities in Iran

The amount of declared investments in the country is impressive: 185 billion dollars waiting to be signed between now and 2020, divided in 45 large projects which should bring oil production from the current 2.9 million barrels a day to up to 5.7 million. The absence of American companies, halted by internal political tensions regarding the deal –all but likely to be resolved under the new US administration- has meant a further stimulus for European Oil Companies and Contractors to enter what seems to be one of the most promising markets across the board.

The ex-novo development of Upstream fields requires several years of planning and construction, even if most of the country’s oilfields have already been explored. After the introduction of the new kind of development contracts last year (with more favorable conditions for foreign oil companies), most prospective fields –both on and offshore- are now in the process of being assigned a foreign partner for development. “West of Iran Oil Fields”, a package of oil fields to be developed through an integrated project, is the most relevant development, totaling 1M Bpd of additional capacity.

The end of the sanctions also gave new impulse to Midstream gas export projects. Preliminary studies on an Iran-Oman subsea pipeline have been completed; construction is expected to commence in 2017, and seven foreign companies have reportedly expressed interest in partnering with local contractors on the project.

As regards Downstream developments, the widespread preoccupation regarding the current state of existing plants and structures, which are lacking years of maintenance and modernization and in some cases had even been abandoned, represents an additional business opportunity for Contractors, component manufacturers and service providers. In particular, a number of refineries have already been scheduled for revamping, with the Tehran, Abadan and Bahmangenoo refineries yet to be awarded.

SupplHi Projects Database counts 48 medium and large projects to be awarded in the country in 2017 and 2018. Based on our analysis, we estimate that contracts for about $35Bn should be signed before the end of the decade. Even though for some of them the Engineering phase has already started -as for the Bandar Abbas Refinery revamping, awarded in April to a Mitsui/Chiyoda JV- most FEED contracts are yet to be signed, thus constituting one of the most substantial opportunities for foreign Engineering firms across the board.

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