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Iran plans 10 billion euro bond issue for oil sector

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Buying euro bonds tricky for adventurous foreign investors; Oil funding may follow gas company bond sale; NIOC chief says maintenance could not cause 1 mln bpd export fall

July 12, 2012 11:56 by



Iran’s national oil company has been authorised to issue up to 10 billion in euro-denominated bonds this year to help finance its activities, NIOC’s director said on Wednesday, in a further sign the country’s biggest business is creaking under sanctions.

The possible bond issue, which could also include trillions in local currency debt, will depend on Iran’s “situation,” Ahmad Qalebani was quoted by oil ministry website Shana as saying at a conference on oil and gas sector development.

Iran’s state finances have come under intense pressure from tightening Western financial sanctions and falling oil prices that have sapped revenues for state companies like NIOC.

The head of Iranian state gas company POGC said in late June the company would issue around $1 billion of dollar-denominated bonds to raise funds for gas projects and the government said a week later the first tranche of rial denominated debt was snapped up by domestic investors.

Even investors who specialise in high risk debt say the many obstacles to investing in the isolated Islamic Republic, especially banking restrictions imposed by Washington and Brussels, are likely to deter any foreign investors.

U.S. and European bank sanctions effectively prevent foreign investors from funding any Iranian oil and gas projects, while a ban on companies supplying technology to Iran’s energy industry makes it even more difficult for the country to develop them.

PRODUCTION

An Iranian oil source admitted earlier this week that restrictions on Iran’s oil exports had forced a reduction in oil production and that NIOC was instead doing maintenance on the fields.

Industry sources estimate Western sanctions on Iranian oil exports have reduced output to below 3 million bpd, levels not seen for two decades, costing Tehran billions in lost revenues.

Qalebani told reporters on Wednesday that occasional repairs may cause a modest fall in production but denied that production capacity had been affected.

“The capacity of our oil production is 4 million barrels, but we stop production in a limited number of wells to carry out overhaul operations in accordance with our routine procedures,” Qalebani was quoted by the Fars news agency as saying.

An NIOC official said at the end of June that Iran’s exports had fallen by 20-30 percent, or around 1 million bpd, but that field maintenance and internal demand for crude were behind the fall.

Qalebani said on Wednesday that maintenance work might cause production falls of 50,000-70,000 barrels in some fields, but he denied that such work could cause a 1 million bpd reduction in exports, according to Fars.

According to official Iranian government figures submitted to the Joint Organisations Data Initiative (JODI), an information sharing system supported by OPEC, the IEA, and the UN, Iran has not produced 4 million bpd of crude since 2008.

It produced just over 3.5 million bpd and exported around 2 million for most of 2011, according to official government data submitted to JODI.

(Reporting by Daniel Fineren; editing by James Jukwey and Mike Nesbit)



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