IEA Outlook: Iran Must Woo Intl Cos to Meet Energy Plans

LONDON, Nov 07, 2005 (Dow Jones Commodities News via Comtex)

Iran could fail to meet its important oil-production targets if it doesn't gain speedy access to foreign technology and capital, the International Energy Agency said Monday.

The IEA's stark warning comes as the Islamic republic's new hardline government appears intent on cooling diplomatic ties with European and Asian countries, a move which many believe will drive a wedge between Iran and potential foreign investors.

After Iran's government announced last week that 40 of its most senior envoys will be replaced, concern has mounted that the country's new overseas representatives will be more in tune with the hardline policies of their ultraconservative President Mahmoud Ahmadinejad.

Ahmadinejad has already been condemned internationally for saying Israel should be "wiped off the map."

U.S.-imposed sanctions on Iran, the second-largest oil producer in the Organization of Petroleum Exporting Countries, have already slowed the pace of development in Iran's energy sector. Now the country is trying to avoid being referred to the U.N. Security Council in an ongoing row over its nuclear program.

In its World Energy Outlook through 2030, the IEA said, "Iran has immense oil and gas reserves, but it is less able than other Middle Eastern Countries to capitalize on them because of barriers to foreign investment and heavy subsidies."

Foreign companies may be allowed to access Iran's energy market but investment terms are still restrictive. Iranian oil fields are in decline and major investment is needed to enhance oil recovery and to develop new fields, the IEA said.

The Paris-based organization said the same measures are needed if Iran is to exploit its massive gas reserves, the second-largest in the world.

Today, Iran is a net gas importer and its oil exports have also fallen sharply. Between 1971 and 2003, the IEA estimated that Iran's crude exports have fallen from 4.3 million barrels a day to around 2.7 million b/d.

The IEA estimated that over the next 25 years, around $80 billion of investment is needed if Iran's crude output is to rise as needed - from around 4.1 million b/d a day now to 4.5 million b/d in 2010 and to 6.8 million b/d in 2030.

It also said if Iran is to achieve its ambition of becoming a major gas exporter to Europe and the Asia Pacific region in the coming years, it has to raise $85 billion by 2030. Only then, the IEA said, will it be feasible for the country's gas output to reach the targeted 240 billion cubic meters by 2030.

Meanwhile, a hefty $92 billion of capital is essential if Iran is to ramp up its electricity capacity from 153 terrawatt-hours to 359 TWh in 2030, the IEA forecast.

But the agency warned that "mobilizing this investment in a timely manner will be difficult unless the subsidies in place today are removed."

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