Deputy Oil Minister: Reforming the financial relationship between the government and the National Oil Company is a national obligation

According to Energy Press, Sajjad Khalili, referring to the special historical moment of reforming the financial relationship between the government and the National Iranian Oil Company in the framework of Article 15 of the Seventh Development Plan Law, stated: “Global developments in the energy market are changing rapidly, and oil no longer has the absolute position it once had. The growth of renewable energies, the development of unconventional oils, and increased energy efficiency have caused the traditional oil market to face serious challenges.” Stating that the sanctions pressures are also reminiscent of the difficult conditions of the years after the nationalization of the oil industry and the pressure from Western governments in the early 1930s, he added: “Domestic realities show that without making changes in the financial and investment structure of the oil industry, it is not possible to continue on the path of the past and achieve future goals.” The need for investment to prevent a natural decline in production
The Deputy Minister of Oil for Supervision of Hydrocarbon Resources, regarding the reasons for the delay in achieving the quantitative targets for oil and gas production in past development plans, said: A technical survey of 101 oil and gas fields currently in operation shows that about 70 percent of Iran’s oil reservoirs will reach half their lifespan in the next five years. This shows the natural decline in production capacity and the need to implement methods for improving production, increasing extraction, and making extensive investments.
Emphasizing that in the absence of sufficient investment, even maintaining the current level of production will be difficult, Khalili added: The repeated emphasis of upstream documents and general policies of the system, including the Seventh Plan, on the necessity of investment and increasing production is not a choice, but a national obligation.
He noted: The experience of previous plans shows that the National Oil Company is unable to achieve these goals with its existing financial structure. The most important reason was the failure to amend the rule for sharing the benefits of oil and gas production among stakeholders.
The National Oil Company’s Real Share; Half the Nominal Share
The Deputy Oil Minister, pointing out that in the past 15 years and in the framework of annual budget laws, the National Iranian Oil Company’s share of crude oil and gas condensate sales has been set at 14.5 percent, stated: “However, in practice, including hidden subsidies from domestic industries, the company’s real share has decreased to less than 8 percent. For example, the National Iranian Oil Company’s share of targeted subsidies has decreased from 34.8 hemats in 1402 to 5 hemats in 1404, meaning that one of the company’s important sources of financing has almost disappeared in two years.”
Stating that the company’s share of the oil and gas production chain, which was about 7.4 billion euros in 1403, has decreased to 5.73 billion euros in the 1404 budget law, Khalili said: “This gap between the nominal and real share has faced the National Oil Company with severe financial constraints and has effectively brought any increase in extraction and development to a dead end.”
He announced: If this trend is not corrected, the National Iranian Oil Company, as the country’s largest economic enterprise, will reach the brink of bankruptcy in the coming years.
From past unsuccessful efforts to the approval of Article 15
The Deputy Minister of Oil for Supervision of Hydrocarbon Resources said about the process of proposing and approving a new financial relationship in the Seventh Plan: Since 2019, efforts have been made to increase the share of the National Iranian Oil Company, but due to the opposition of some interested institutions, no results were achieved.