According to Bargh News, Hosseini, CEO of Iran Energy Exchange, said at a meeting of the Conference on Financial Development in the Oil Industry, referring to the Energy Exchange’s capacity to finance the country’s oil industry projects: Reduce the volume of investment over time and leave it to the capital markets. He added: “We must recognize this shift in the financing paradigm from government financing to capital market financing, because government funding is currently limited and does not meet all the needs of the industry.”

He added: “In the future, the position of the capital market in the affairs of the country should be recognized.” The capital market is a complete ecosystem and can meet many of the country’s needs. Hosseini also continued: “The capital market with financing methods and structured tools in the world tries to direct financial resources to industrial projects, and we must note that the functioning of the capital market is different from the banking system.”

Electricity consumption will double in the next 10 years

“We need a lot of investment in electricity, oil and gas, and even global statistics show that in the future, investment in these sectors will be growing,” said the head of the Exchange and Energy Organization. He added: “According to statistics, in the next ten years, our electricity consumption will double and we need 50,000 megawatts of additional capacity.” There are also 26 petrochemical projects under construction that require $ 15 billion in financing.

* Why is financing through the capital market important? Hosseini said: “In the development of the oil industry, ie oil exploration and production over the next ten years, $ 600 billion of capital is needed, this is if the energy intensity is reduced by 50% and if this reduction is not done, this figure will increase even more.” As a result, attention to capital market capacity is becoming more important than ever. He continued: “In general, there are many reasons why we should move towards using the capacities of the capital market.” One of the reasons is the sharp fluctuations in oil prices and the government’s inability to finance the oil industry through the sale of oil.

The head of the Exchange and Energy Organization noted: “Also, oil and energy companies currently owe a lot to their contractors and can not even cover their current expenses, let alone be able to provide this amount of investment.”

Hosseini added: “Another reason for the need to use the capital market and get rid of government funding is the system of subsidies governing the energy sector, which makes the Ministry of Oil and Energy unable to obtain the necessary financial resources.”

* Reasons for neglecting financing through the capital market

He pointed out: “Due to the high capacity of the capital market, unfortunately, this market is not considered for some reasons, one of which is the bank-based financing system, which is the culture of the country’s financing system.”

The head of the Exchange and Energy Organization continued: “Also, the restriction of financing through the capital market to public joint stock companies is another reason that has made the share of the capital market in financing low.”

He also said: “Also, the capital market has little flexibility in receiving collateral compared to banks and only accepts collaterals that have high liquidity, which has made it more difficult to attract capital in this market than banks.” . One of the advantages of the capital market for financing is the transparency of this market, which unfortunately, due to some misconceptions, investors are afraid to enter this market.

In the end, Hosseini pointed out: “We in the Energy Exchange Organization do our best to increase our share of the country’s monetary market day by day by facilitating conditions and creating a competitive advantage over banks, and thus play an important role in financing oil industry projects.” Let’s play.