The new man for the old job: Hamaneh in Iran’s hot seat

After five hectic months of political tension and international embarrassment, Iran has finally found an oil minister. Oil&Gas Middle East speaks to analysts to find out if he is indeed the chosen one for the Iranian oil industry.

  • E-Mail
By  Jyotsna Ravishankar Published  January 8, 2006

Regional Focus After five hectic months of political tension and international embarrassment, Iran has finally found an oil minister. The new man, Kazem Vaziri Hamaneh, is not so new, as he has been the acting oil minister during the past few months of nominations and rejections. Vaziri Hamaneh was also the deputy oil minister to Bijam Namdar Zangheneh, who served during Mohammed Khatami’s administration. The new minister has to do a fine balancing act between the radical president and the conservative Majlis, warn experts. Iran’s oil industry has its fair share of problems and is far from flourishing. From the controversial buy-back deals to the xenophobia in the oil industry, Iran has a long way to go before achieving its ambitious production target of more than five million barrels per day (bpd) by 2009, and seven million bpd by 2024. Many leading analysts who talked to Oil&Gas Middle East nevertheless believe that Vaziri Hamaneh may just be the man for the job. One of the primary problems that Iran has is its short-sighted buy-back deal that has irked many international companies. As recently as last month, the state-owned National Iranian Oil Company (NIOC) got into a spat with Shell over the terms of the contract. Iran’s constitution puts oil and gas within the state sector and forbids concessionary basis or direct equity stake production-sharing agreements with foreign firms. As an alternative, the country had worked out the buy-back formula, under which foreign companies are repaid development costs and given an agreed rate of return from initial production. But foreign companies have complained the scheme gives them no guarantee they will be permitted to develop their discoveries, let alone operate them. However, the new minister has already made statements about making the terms of the buy-back deals better suited for both the international companies and the state-owned ones. In the most recent Opec meeting, he said, “We are going to invite international oil companies to continue investments in Iran, but we will also address the difficulties of the buy-back deals. He also said: “There is no responsibility for the contractors after the work is completed and it’s returned to the NIOC.” This statement has succeeded in sending positive signals about his approach to the problem. Julia Nanay, senior analyst from PFC Energy, based in Washington, believes that the new minister is already taking constructive steps to implement changes in the state-owned NIOC. “I think whatever the new minister does in terms of making changes at NIOC may take some time. But, at the moment, he appears to want to steer the industry in a constructive direction, arguing that foreign companies need better terms to stay in projects for a longer period than the buy-backs offer,” Nanay said. Other leading analysts also believe that the oil minister may just be the temperate kind of person needed to shake up the industry. “Vaziri Hamaneh will be the moderating force in the Iranian oil industry,” said Manouchehr Takin, a senior petroleum analyst and an Iranian affairs expert. In a telephone interview from the Centre for Global Energy Studies based in London, he said even if the Iranian hardline president Mahmoud Ahmadinejad wanted to make radical changes to the oil industry, Vaziri Hamaneh would argue the case, instead of blindly implementing changes. “Put simply, I think Vaziri Hamaneh would not let anyone rock the boat,” said Takin. The analyst believes even his statements about the buy-back deals illustrate his rational approach to matters, as against the rhetoric spewed by the president. “He is only saying he will evaluate the buy-back deals to make it more favourable to both parties, he is not engaging himself in propaganda war against any previous decisions.” Vaziri Hamaneh also has more supporters inside Iran than the previous three nominees for the post. Kamal Daneshyar, head of parliament’s energy commission, said: “He has 30 years of experience in the oil sector, and I personally back him. He is an expert, committed, a follower of the Supreme Leader, and religious.” The minister will also benefit from his experience in the oil industry, as he has worked in the sector since the 1979 Iranian revolution. During his tenure, he has not been accused of any acts of corruption or nepotism. This will go down favourably in Iran, where the oil industry is severely criticised for corruption, especially with the buy-back deals. Conservative parliamentarian Nafiseh Fayyaz Bakhsh has praised him for his simple lifestyle. “He has never promoted his own family members within the ministry,” she said before the parliament vote. “His home is in a modest part of Tehran. And his neighbours can tell you he has never moved house, even as he climbed upwards through the ministry ranks,” she told AFP. The previous nominees were rejected for just this reason, apart from the allegation from some members of the parliament that all of them were just cronies of the president. President Mahmoud Ahmadinejad had made oil the cornerstone of his campaign in June. He also earlier pledged to reform the oil industry by ridding it of the “mafia” that runs it and distributing the revenues more evenly among the poor. But the previous nominees of the president were all novices to the industry and also had amassed considerable wealth, which made the parliament seriously question the intention behind these nominations. Majlis’ deputies rejected Ahmadinejad’s first choice on August 29, arguing that the nominee lacked experience in a sector that accounts for 80% of the country’s export revenues. The president’s second nominee withdrew ahead of a vote, while the third was also rejected. “There is no doubt that Vaziri Hamaneh is the best option, so far, given his long record in the oil ministry,” said Hossein Afarideh, a member of the Parliament’s influential energy commission. Most analysts believe that Vaziri Hamaneh was a compromise candidate, because a fourth rejection would have been a humiliation for Ahmadinejad. Takin believes that the new oil minister is too much of a gentleman to deal with the oil industry the way the president would have preferred, which is to make drastic changes to the structure of all national oil companies. However, Takin also says he is the man to steer Opec’s second largest producer in the right direction, as he is a little more pragmatic and has actually worked in the industry. With about 125.8 billion barrels of proven oil reserves, which is roughly 12% of the world’s reserves, Iran has been ailing since August without a minister. At the moment, Iran is also battling to keep capacity steady at just over four million barrels per day (bpd). Maintaining this output means investing in new fields, and that requires a minister who can sign deals. It also means the need to attract large investments from western companies, which Hamaneh may be able to do, as he has already said that they are welcome, and he will make terms better for them. The International Energy Agency in its recent outlook says Iran’s oil industry must attract some US $80 billion in investment over the next 25 years if it is to meet soaring domestic energy demand and remain a major exporter. Its fledgling gas export industry needs a similar injection; though Iran has the world’s second-biggest reserves, it is a net importer. But having served the industry for over two decades, the new minister will know more about previous decisions and projects when compared to the other nominees. Most of the Iranian projects are mired in small print and paperwork, which this minister can set right, say industry insiders.

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code