Tough act to follow

09 May 2017

Rouhani has set in motion Iran’s energy renaissance, implementing his vision will prove more challenging.

With a few weeks to go before Iran’s presidential election, incumbent Hassan Rouhani was widely seen as a favourite to win opened a refinery in the country’s south and declared Iran self-sufficient in gasoline.

The opening of the Persian Gulf Star Refinery in Bandar Abbas, which receives gas condensate from the giant South Pars gas field was “an old dream come true”, he was quoted as saying by state media.

The first phase of the refinery has the capacity to meet 12 million litres a day of Euro 4 petrol, with the option to expand up to 36 million litres when it becomes fully operational.

By the end of this year, the Islamic republic would become a net exporter of petroleum.

Iranian state media was keen to portray this launch as well as that of a raft of petrochemical projects scheduled to come online as a triumph for the Rouhani administration as well as the country’s economy of resistance.

Rouhani inherited an economy beleaguered by years of sanctions when he assumed office in 2013. Not only did he have to mend fences with the international community after his predecessor Mahmoud Ahmadinejad’s controversial tenure, he also had to deal with high inflation rates, compounded by the decline in oil prices a year into his term.

With skilled diplomat Javad Zarif as foreign minister, Rouhani convinced the P5+1 countries that Iran was willing to scale back its nuclear ambitions in return for economic reintegration with the world.

A year since the Joint Comprehensive Plan of Action, Iran has managed to attract significant interest from international oil companies.

Last year, the National Iranian Oil Company (NIOC) signed a heads of agreement with France’s Total and China National Petroleum Corporation worth $4.8bn to develop phase 11 of the South Pars offshore gas field.

Earlier this year, the state oil company pre-qualified 29 firms to participate in developing oil and gas fields in the country - tenders for which are expected this year once the Iran Petroleum Contract is finalised.

At the Iran International Oil, Gas, Refining and Petrochemical Exhibition earlier this week, Gholam-Reza Manouchehri, deputy head at NIOC said Iran is expected to sign $80bn worth of contracts with oil and gas companies over the next two years. Around 24 agreements have been signed with international oil and gas companies to study various concessions around the country.

Iran also has ambitions of doubling its crude production capacity to seven million barrels a day, from its current 3.7 million b/d - though the timeline to achieve this remains unclear.

The Rouhani administration has done much to court investors and revive the country’s energy sector.

Iran’s Financial Tribune reported that the country has seen a 40 per cent improvement on the misery index since he assumed office. The index created by economist Arthur Okun determines how the average citizen is doing economically based on various key indicators.

With the elections only ten days away, the current administration is keen to highlight Iran’s economic gains over the last four years.

Rouhani also needs to convince the Iranian public and the country’s revolutionary old guard that he has not ceded ground to the west through his reformist policies.

While Ahmadinejad’s candidature has been rejected, Rouhani would face competition from hardline candidates who have since joined the fray.

While investors in the energy sector would like to see the return of Rouhani for another term, whoever wins would have to oversee multi-billion dollar worth of contracts in the energy sector and facilitate investment back into the country - a very tough act to follow. 

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