Summary
StatoilHydro announced on Friday that it has no plans for further investment in the Khorramabad block. The company's seismic operations were concluded before 2009. No firm plans exist for drilling a well. The Mehr News Agency has reported that the seismic data verified extensive gas and oil reserves. National Iranian Oil Company owns the block. Anaran field in the Khorramabad block is one of several promising discoveries. U.S. sanctions restrict investment in Iran to $20 million.
Analysis
Iran, an OPEC member, is under some constraints as regards commercial production under the quota system. The question immediately arises:Could StatoilHydro produce new oil even if it made the capital expenditure? In this time of low demand, the answer is probably not. Thus the incentive for increased investment is considerably diminished. Royal Dutch Shell, Eni and Petrobras are all involved in oil and gas exploration to one degree or another in Iran. But it is difficult to tell what they are doing and how much money, if any, they are spending. All three companies, like Statoil ASA, have many other investment opportunities, all of them far less controversial. This is a go slow time in the industry. The name of the game today is to build up the balance sheet, reduce debt, continue with low cost projects that are immediately accretive to earnings. It is true that all of these companies are engaged in large investment, long term projects, mostly in the liquefied natural gas (LNG)sector. These projects will continue to receive funding as the potential return is great. So why spend money in Iran when things could go down hill there at any time?
