The Arab Weekly| Walid Khadduri: About a year ago, the Iran nuclear deal � officially known as the Joint Com�prehensive Plan of Action (JCPOA) � was formally implemented. JCPOA was received by Iranians with hope of rebuilding the country�s energy industry, as well as providing an opportunity to regain the country�s share in world oil markets and access again to capi�tal and technology.


The withdrawal of most interna�tional oil companies (IOCs) because of the sanctions created a large gap in Iran�s energy industry. The JCPOA allows for the lifting of some sanc�tions against Iran in exchange for limitations on and greater interna�tional inspections of the country�s nuclear programme.


Since those sanctions ended, the Iranian government has tried to in�crease production rapidly to reclaim Iran�s market share, especially in Asian markets.


The government also tried in the upstream and downstream sectors to strike a balance between compet�ing domestic power groups, while working to strike a balance between the qualification of Western and Asian oil companies in future bid�ding processes. Much has been ac�complished. What remains unclear is the stand of US President Donald Trump on JCPOA, considering his strong criticism of it during the pres�idential campaign.


Iran succeeded � rather fast � in increasing oil production to nearly pre-sanction levels. Production reg�istered 3.7 million barrels per day (bpd) in October, compared to the pre-sanction levels of approximate�ly 4 million bpd. Crude oil exports increased to more than 1.7 million bpd with the bulk of exports � about 1 million bpd heading to Asia, ena�bling Iran to regain market share.


Much of the early crude oil ex�ports were stored in Iran�s very large crude carriers (VLCCs), which acted as floating offshore storage during the sanctions. The National Iranian Tanker Company (NITC) owns 42 VLCCs, seven of which resumed shipment of crude oil as early as last December. All of the vessels, flying the Panamanian flag, discharged their cargoes at Asia-Pacific destina�tions.


The National Iranian Oil Com�pany (NIOC) has qualified for work in the upstream sector 29 IOCs from more than a dozen countries, most�ly Asian, including Japan, China, South Korea, Indonesia, Malaysia, Thailand and India. European IOCs include France�s Total, Italy�s Eni and Anglo-Dutch Shell. Britain�s BP did not express interest. US firms were prevented from participation because of remaining sanctions.


It makes sense for the Japanese IOCs to participate heavily in Iran�s upstream, as they are traditionally large buyers of Iranian crude oil. China, for example, is the largest importer of Iranian crude oil, with about 600,000 bpd. Japan is the sec�ond largest importer.


Asian oil companies were paying Iran with their local currency while sanctions were in place, avoiding using US dollars and the sanctions. Iran used the Asian currencies to purchase capital and consumer goods from these countries.


The predominance of Asian firms provides a new landscape for Iran�s energy industry, which was previ�ously dominated by Western firms. This phenomenon will change Iran�s energy geopolitics. Asian oil firms are expected to provide the technol�ogy and the capital necessary for a take-off of the Iranian oil industry. Iranian officials have estimated that $100 billion is required for the de�velopment of the oil and gas sector.


The first two fields to be devel�oped straddle the borders with Iraq: North Azadegan and Yadavaran. Ne�gotiations for the development of phase 2 of these fields are being held with China�s China National Petro�leum Corporation (CNPC) and Sin�opec. Output level of the two fields is estimated at 165,000 bpd.


In addition to these two fields, talks are also being conducted with Total (in partnership with CNPC) for the development of South Pars gas field and Shell.


Upstream work for the develop�ment of new fields is to be undertak�en under new Iran Petroleum Con�tracts (IPC). Among the IPC terms, an IOC must work with an Iranian company. This ensures that Iranian businesses and their shareholders are directly involved in Iranian oil and gas.


Accordingly, the IOCs must rec�oncile conflicting Iranian vested in�terests: The reformists advocating �international cooperation� and the conservatives with the �resistance economy� agendas. This is not an envious task for the IOCs.


Asian firms, mainly South Ko�rean, have dominated the down�stream sector. National Iranian Oil Refining and Distribution Company (NIORDC) has awarded a $1.91 billion contract to Daelim to upgrade Iran�s second largest refinery, Isfahan. The contract was awarded under a $15 billion funding deal for �oil, gas and infrastructure�. The upgrading of Is�fahan refinery will increase 20% the capacity of gasoline and double liq�uefied petroleum gas (LPG) produc�tion at the plant.


With the Daelim contract, South Korean firms have three of the five refinery agreements signed by NIORDC since international sanc�tions were lifted. It is estimated that South Korean firms will undertake $12 billion worth of downstream projects.


Other contracts won by South Ko�rean firms include one by Daewoo for $10 billion heavy work construc�tion at the Hormuz refinery and a contract awarded to SK for $20 mil�lion to study increasing gasoline and diesel output at Tabriz refinery.