Text size:

  • Small
  • Normal
  • Large
Tehran could raise as much as $12.5 billion privatising plants like this refinery.
Tehran could raise as much as $12.5 billion privatising plants like this refinery.

Iran to privatise oil and gas sector

Iran plans to privatise its oil refining, petrochemicals and oilfield services sectors but it may have problems finding buyers.

Iran plans to privatise its oil refining, petrochemicals and oilfield services sectors but it may have problems finding buyers. Under the threat of stiffer sanctions over its nuclear programme, the second-largest OPEC oil producer is seeking to accelerate the sale of state assets to help balance the government's books and revitalise its troubled economy.

Now, even some parts of Iran's previously sacrosanct petroleum industry could be up for sale in a reversal of the country's previous policy of strict nationalisation of oil and gas assets. "The work on ceding [ownership of] oil companies has begun and based on plans, all petrochemical units and refineries will be ceded, including service, drilling and support companies," the Iranian oil minister Massoud Mirkazemi said on Saturday, according to the semi-official Mehr News Agency.

A senior Iranian privatisation official said this month Tehran was aiming to raise about US$12.5 billion (Dh45.91bn) by selling more than 500 state firms to private-sector investors in the coming year, Reuters reported. But the long-running standoff over Tehran's nuclear ambitions has led the US to exert increasing pressure on its allies to shun commercial dealings with Iran. Tehran may therefore have difficulty finding buyers willing to risk a spat with the US.

Another problem is that the refining and petrochemicals industries face tough times due to the slow pace of global economic recovery. Already thin petroleum refining margins, which contracted sharply last year as the downturn sapped demand for fuels, will shrink even further this year, the consulting firm Wood Mackenzie predicts. "Refinery over-expansion from the previous up cycle will be felt while the industry adjusts to shifts in market demand," the international consulting and publishing firm Hart Energy said in a recent issue of its Global Refining and Fuels Report.

Tehran will therefore be selling assets at the bottom of the cycle, further reducing its chances of attracting lucrative offers. But two sources of potential buyers stand out: China and Iran. Of the UN Security Council members, China has been the least receptive to US calls for new sanctions on Iran. That is because it has been building a strategic energy relationship with the country. China is already the biggest buyer of Iranian crude, offsetting declining Japanese imports.

To help bolster its future energy security, Beijing wants and has been granted direct access to Iran's upstream oil and gas sector. In return, Tehran has sought investment commitments from Chinese oil firms to help upgrade and expand its lagging refining sector. Mehr reported last November that China's state-controlled Sinopec had signed a memorandum of understanding to invest $6.5bn in Iranian refineries.

Tehran may court China's state-controlled oil companies as buyers for existing Iranian refining and petrochemicals assets, even though that would damage Beijing's relationship with Washington. The US has called for a ban on exports of oil products such as petrol to Iran, which does not produce enough for domestic demand. China has resisted because it is unwilling to agree to "a significant reduction in the diversity of its oil supply sources in the Gulf", the US-based foreign policy analysts Flynt Leverett and Hillary Mann Leverett have said.

On Friday, the state-owned Press TV said Tehran had transferred stakes in six petrochemicals plants and power stations to a social-welfare investment organisation of the Iranian armed forces, in lieu of a debt payment. In the past, many of the assets that Tehran has "privatised" have ended up in the hands of factions with strong ties to the ruling elite. Last year, a $7.8bn "privatisation" deal saw 51 per cent of Telecommunication Company of Iran, the dominant Iranian telecommunications company, transferred to Etemad-e-Mobin, a consortium linked to the Revolutionary Guard Corps.


Back to the top

More articles

Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 A sign points the way to an outdoor market popular with German visitors on the Polish side of the German-Polish border. Sean Gallup / Getty Images

In pictures: A decade since the European Union went east

May 1 will mark 10 years since the European Union expanded east, taking in countries like Poland, the Czech Republic and the Baltic states as new members. And though the border region between Germany and Poland is flourishing with trade and cultural exchange, the open border has also brought a sharp rise in crime.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.


To add your event to The National listings, click here

Get the most from The National