Iran confirms oil minister Owji with industry background seen a plus

Iran's Parliament on Aug. 25 confirmed Javad Owji as the country's new oil minister, taking on the job at a critical time when OPEC's fourth-biggest crude oil producer faces stalled nuclear talks that could pave the way to add more barrels to the market and regain lost share.,

Owji was approved 198 to 70, with 18 abstentions, Parliament speaker Mohammad-Bagher Ghalibaf announced in a televised address. He succeeds Bijan Zanganeh, who has 20 years of service at various ministries. Foreign minister Hossein Amirabdollahian was also confirmed, 270 to 10 with six abstentions, replacing Javad Zarif who has been leading Iran's side in the nuclear talks.

"Following the unfair US sanctions against the Iranian nation, oil and gas condensates sales have considerably decreased and rivals have owned a part of our export markets," Owji told Parliament during hearings for his nomination. His approach to defending Iran oil sales will be to focus on "oil for goods and oil for investment," he said. "We will hopefully find new oil markets."

Talks in Vienna aimed at reviving the Joint Comprehensive Plan of Action and removing US sanctions on Iran 's energy sector have gone nowhere since Iran's presidential election on June 18. A seventh round was expected to start after President Ebrahim Raisi's Aug. 5 inauguration but has not been announced.

Now Owji faces a more immediate task. Amid budget constraints, Parliament previously decided to restrict oil worker pay raises and limit salaries, triggering protests in the fields. "Mr. Owji should solve this problem, reaching out to higher levels or inside the Parliament," said Hamid Hosseini, a spokesman for Iran's oil products exports guild.

Uncertainty over the nuclear talks creates the real possibility that 1.5 million b/d of expected Iranian supply growth through August 2022 will not hit the market, according to Paul Sheldon, chief geopolitical adviser for S&P Global Platts Analytics. Iran is exempt from OPEC and allies production cuts,

``If a nuclear deal is reached, the new oil minister would need to navigate the return of Iranian barrels to the market with the strategic complications this would create for OPEC+ production decisions," he said. ``Down the road, he may also need to politically balance the need for foreign investment in the oil sector with opposition from hardline government circles to ceding too much control of domestic resources."

Owji, 55, has a history in the natural gas industry, having served as managing director of the National Iranian Gas Co. from 2009 to 2013.

With a nuclear deal, Iran could return more oil to the market "quickly," with exports at 2.3 million b/d and production of more than 4.2 million b/d, while no deal would mean shipments closer to 1 million b/d, Hosseini said. Iran produced 2.52 million b/d in July, its highest since April 2019, according to the monthly Platts survey.

Hosseini said that Owji would be able to sell more oil than before even under the sanctions, and should be able to sell at least 2.3 million b/d of oil as foreseen in the Iran budget.

"Today, the oil sales and going around the sanctions are carried out in various ways," he said. "There is a confusion in the system as to whom to refer to. Mr. Owji should and can synchronize this given his relations with other organizations under Mr. Raisi's administration. He can definitely perform more successful than now. The existing directors were extremely cautious because of the risk of no return for the oil money."

Industry insider

Owji will join the oil ministry in a position of strength because he has years of experience in the oil and gas industry, and will have a good understanding of the industry's needs, said Iman Nasseri, who runs consultancy FGE's Iran service and previously worked in the country's oil industry. He noted that the other candidates for the job were "all inferior" to Owji in terms of industry experience. To some, Owji is not considered "the right fit for a ministerial role" because of his background, he said.

"His biggest challenge will be managing the relationship with OPEC and retaining Iran's position within OPEC, one that was created and preserved by two distinguished figures with OPEC: Iran's late OPEC Governor Hossein Kazempour and the previous oil minister Bijan Zanganeh," Nasseri said. While Zanganeh was very powerful in both foreign policy because of OPEC and very experienced in terms of country level oil policy, Owji has more company background, Nasseri said. "The second challenge is continuing to steer the oil industry with the US sanctions if the sanctions will not be lifted any time soon."

Being part of former president Mahmoud Ahmadinejad's administration eight years ago doesn't help Owji, Nasseri said. "If Mr. Owji wants to hire back the radical people from Ahmadinejad's time, it is another challenge," Hosseini said. "The NIOC's body is not much ready to absorb these directors," he said, referring to the state-run National Iranian Oil Co.

Owji has highlighted in his plans to Parliament Iran's 25-year trade and security pact with China signed in March that could lead to increased oil flows from Tehran to Beijing.

Iran's main oil customers are China, India and elsewhere in south Asia including Turkey, Hosseini said. "We should be able to make barter deals with them or resolve the JCPOA and bring back our traditional customers."

For China to commit to investments in Iran, sanctions need to be lifted, he added. "The Chinese are interested to carry out some infrastructure, oil projects inside Iran in return for oil. But this needs for the sanctions to be lifted. I think it's unlikely that big Chinese oil companies would be interested in oil projects" if sanctions remain.