Iran warns against UN blocks on oil investment

Singapore, Sept 7: Oil prices would rise if the West imposed new obstacles to investing in Iran's oil sector, although Tehran does not expect such measures from the United Nations, a senior government official said today.

''I don't think the Security Council will put sanctions against oil and gas,'' Mohammed Hadi Nejad-Hosseinian, deputy oil minister of the world's fourth-biggest oil exporter, told reporters at a conference in Singapore.

''If they stop us from more investment in oil, long-term, oil prices will increase.'' Nejad-Hosseinian had told Reuters yesterday he did not expect the Security Council to put curbs on the OPEC member's oil supplies or for Tehran to halt production, a source of concern for traders who fear Tehran might retaliate against any punitive measures by disrupting West Asia supplies.

Iran, which pumps about 4 million barrels per day (bpd), failed to meet an August 31 Security Council deadline to halt uranium enrichment or face the threat of sanctions, although the European Union has engaged in a new round of diplomatic efforts this week.

Global benchmark US crude oil prices have fallen by around 11 dollar from record-highs above 78 dollar a barrel to a five-month low of 67.41 dollar this week, but the market remains watchful over Washington's drive to get the Security Council to impose sanctions on Iran.

Apart from the risk to short-term supplies, analysts fear sanctions could slow much-needed investment in Iran's upstream sector, home to the second-largest oil reserves, accounting for about 10 per cent of the world's total proven reserves.

A lack of investment, stymied for decades by vicious infighting and layers of bureaucracy in Iran, would make it more difficult for Tehran to bring onstream new oilfields or boost output at older ones to meet future demand.

Output is declining at between 250,000 and 350,000 bpd, according to analysis by FACTS Global Energy.

The US government estimates Iran's mostly onshore fields are falling at a rate of 10 per cent a year and require investment for upgrading and enhanced recovery techniques.

Foreign oil companies such as France's Total and Japan's INPEX Holding Inc are moving into Iran's oil industry despite the US Iran-Libya Sanctions Act (ILSA), which threatens sanctions against non-US companies that invest there.

REUTERS