The following is the full text of the interview he gave to “Iran Petroleum”:

What has been the first and foremost tangible result of introduction of investment opportunities?

In the wake of the event, which marked a turning point in NIOC investment, we have been seeing a warm inclination vis-à-vis the upstream oil sector. It was also accompanied with some decisions, which the Ministry of Petroleum and NIOC had long sought. A case in point was the decisions about the business atmosphere in the upstream sector. Previously, the upstream business sector was limited to buyback and IPC agreement types, whereupon investors stepped into various sectors and received return on investment within a specific framework. In this method, due to the lack of a transparent and predictable framework, we have a limited number of players. In other words, only investors well familiar with oil and investment literature were engaged. The key event with the May event was that for the first time, we exposed all NIOC projects to public display. The other point was the presence of officials and unveiling of packages of facilities like the Economic Council’s decision on facilitating and encouraging upstream contracts, financing of upstream oil contracts, and NIOC’s approach in using public-private partnership (PPP). In the end, the private sector and the audiences concluded that NIOC was shifting away from the principal-agent system to embrace partnership with the private sector, which is promising. Another issue was petrochemical companies’ rapturous welcome in the wake of our negotiations in the May event, which was due to modifications in the internal rate of return on investment, financing and facilitation and encouragement by the Economic Council. Besides  the agreements signed for  the development of the Gardan and Pazan gas fields back then, two more agreements  are expected to be signed for  the gas field development.

What agreements have since been signed and how much investment has been attracted?

In the upstream sector, we absorbed about $5 billion in investment, the bulk of which having been struck with the steel industry and petrochemical holdings. In the value chain supply and PPP contracts, we have $2 billion worth of agreements, some of which have already been signed, and some are near finalization and they are all BOO. For instance, two offshore rig contracts were signed between Hamid Bovard, CEO of NIOC, and a consortium led by Bank Shahr to add two offshore rigs to national offshore drilling fleet. In addition, Iranian Offshore Oil Co. (IOOC) is signing deals for two more offshore rigs. National Iranian South Oil Co. (NISOC) is set to cut deals for 20 onshore drilling rigs under BOO framework. Negotiations have been held for adding 500,000 b/d to the crude oil processing capacity of skid-mounted facilities. In continuation of the May event, we have undertaken more measures and we are trying to provide various business modules. For instance, we have reached agreement with National Iranian Tax Administration (INTA) to issue transparent tax instructions for the upstream oil sector. We have also held talks with Social Security Organization (SSO) regarding insurance instructions. We are also working out mechanisms to encourage investors to invest in the upstream sector, particularly high-risk domains. In short, we are trying to broaden the business space.

Apart from packages of facilities, what steps have been taken to change the view of the audience and win their confidence?

We have tried at NIOC to make changes tangible for the audience. To that effect, we have changed the frameworks that have taken shape in the past – frameworks that were helpful in the past, but they need to undergo revision now. For instance, NIOC’s positions were firm and unchangeable in the past and we were by no means ready to haggle on our principles despite their divergence with the market and business rules; however, during the May event, we showed that this view has changed. All these changes and updates led to rapturous welcome for upstream and IPC contracts. Another issue was the return of foreign companies with which we could interact under conditions of sanctions. Some of them had suspended their contracts, but we saw them cozying up to us. Our own domestic companies also broadly welcomed this new approach of NIOC.

In light of the necessity of domestic investment and the breadth of the upstream market, what solutions have you developed?

NIOC projects are mainly multimillion-dollar ones and we always sought big investors. In fact, our impression was that the upstream sector is reserved to bigwigs. When a country does not face restrictions and sanctions, that may be appropriate, but our country is under sanctions and we can rely on domestic companies, therefore considering big contracts would not be logical. Therefore, we split the upstream economy and sought to make our contracts smaller in a bid to facilitate the private sector’s partnership and make financing feasible in the local capital market. In this regard, we pursue PPP agreements in drilling rigs and crude oil processing units with NISOC, Pars Oil and Gas Co. (POGC) and IOOC, which we hope would result in good results soon.

What challenges exist in the way of domestic investors?

As far as the upstream sector is concerned, we should keep in mind the fact that due to the weakness of economics of contract, we do not have economically powerful companies in the upstream sector. In other words, these companies are not financially able to invest in multibillion-dollar projects. The companies that have such capacity are affiliated with other institutions like banks. In fact, we do not have any companies in the upstream sector to have earned revenue via oil business. Of course, the bulk of this challenge is directed at the economic aspects of our contracts due to the absence of precise calculations in the past and low profits for companies. However, with a new approach that has taken shape at the Ministry of Petroleum for further sweetening the terms of contracts, we would in the midterm see oil business companies gain power. However, to reach that point, existing companies need assistance and reinforcement. NIOC is best-placed to handle this job, both financially and in terms of prestige.

What can NIOC do in overcoming challenges in the way of investment in upstream projects?

Currently, we focus on NIOC using its standing in the capital and money market to find legal and structured solutions for supporting small and medium enterprises so that they would gain assets through agreements signed therewith. Normally, our assumption is that the investor would provide full financing, after which the capital would return. In the wake of the 12-Day Imposed War, NIOC is contributing to investment by local companies in a bid to reinforce them economically. We have also told agent banks that we are ready to guarantee investment contracts. We recently did so for two private firms. We plan an event in this domain to reduce uncertainty and bolstering hope among investors in the upstream sector. In fact, assuming the persistence of sanctions, we intend to make maximum use of local potential through a more effective role by NIOC. We have so far seen good cooperation on the part of the Central Bank of Iran (CBI) and Securities and Exchange Organization (SEO). We will soon unveil new instruments, as well. We also intend to proceed with the project company mechanism for investing in crude oil sales, in collaboration with SEO and an investor. National Financing Council is set to adopt a decision for the Petroleum Industry Guarantee Fund. Such big steps indicate that NIOC, banks and National Development Fund of Iran (NDFI) are offering full-throated support to private firms to boost their economic basis. In parallel, we are modifying the terms of contracts to facilitate their terms. We intend to make them reginal and logic. Some risks pertain to state interference with contracts, for whose removal, the Council of Ministers are reviewing a PPP bylaw that would hedge risks which the private sector cannot manage. That would give assurance to the private sector and investors. Throughout the contract, the capital and the profit considered at the beginning would not be harmed.

Apart from sanctions and political restrictions, what perspective do we need to adopt not to lag behind the world?

Our measures show that we have mobilized NIOC’s capacities to make maximum use of local potential under the present circumstances and we will definitely do so. However, one reality should not be ignored. All global estimates indicate that the oil boom period is limited and it would be unacceptable to imagine that we can use oil resources for an unlimited period. There may be disagreements on the year when oil would expire, but the very principle of expiry is agreed upon. Under such conditions, the top priority for the country and NIOC should be to transform the underground wealth into surface wealth. In fact, gone is time when we could maintain oil for future generations. Therefore, we should focus our efforts on speeding up oil extraction and sales to use oil revenue as a generative wealth. For this purpose, we need to adopt courageous and audacious decisions.

Will such alternative wealth be sustainable?

Most world nations are moving in such direction. We should seek how Saudi Arabia, Kuwait or Qatar are using their resources or why oil companies in neighboring countries have changed their names to energy firms. We need to find out how these companies change their missions and approaches. For instance, Qatar Petroleum has become QatarEnergy. Saudi Aramco is also set to step into renewables. In fact, these countries have made forecasts for alternatives to oil in the long-term to contribute to global energy supply. The path is clear, but we need to accept in the first step that the time for using oil resources is limited and there is no time for trial and error in development and exploitation of oil resources. We need to acknowledge that as old as an oil company may be, it had better seek assistance from the private sector in some domains like field development.

How attractive can the Iran market be for foreign investors?

Despite all of its bottlenecks, the Iran market continues to attract foreign investors, particularly because we have created new attractiveness in contracts and projects. However, some new risks need to be removed because we have already shown our foreign partners in buyback deals that we remain committed to our obligations. Therefore, we do not face any tough way to bring foreign investors onboard, but as buyback contracts have shifted from short-term to long-term we need to give assurances for political and security stability.

Should sanctions be lifted and economic overture occur, what would be the challenge to the petroleum industry and, if any, what would be the solution?

Under the present circumstances, in addition to the necessity of removing sanctions and injecting new resources, we need to make serious modifications into the governance and management system. We ought to guarantee support to managers who assume responsibilities in a bid to spare them any risk in decision-making. Therefore, in my view, removal of sanctions and giving assurances to managers would enable them to make decisions in favor of national interests. That would not mean giving freedom of action to managers for abuse of authority, rather than that we want them to make the best decision at sensitive junctures in favor of the country. The petroleum industry faces an expiry date. Part of this industry pertains to valuable underground resources and another part is associated with its marketing and monetizing. This wealth could not be renewed. In some cases, much more restrictive than external sanctions are internal bureaucracy and unsettling conditions.