Oil markets appear to be…
Following through with his promise,…
Iran’s oil minister, Bijan Namdar Zanganeh, says that once UN sanctions are lifted, his country could quickly double its exports of crude oil and wouldn’t give up “even one barrel” of its share in the world market.
In an interview broadcast on Iranian television, Zanganeh didn’t say whether he was optimistic about the outcome of Iran’s crucial talks with six world powers, Germany plus the five permanent members of the UN Security Council, Britain, China, France, Russia and the United States, known in shorthand as the P5+1. The talks end on Nov. 24.
Nor did Zanganeh say how much oil his country was exporting now, except to say it was “much lower than 2 million barrels per day.” in the meantime, he said, Iran’s own consumption of oil is between 1.7 million and 1.8 million barrels per day.
The minister focused his optimism on Iran’s ability to rapidly increase production “within a few months if the nuclear talks end positively.”
In 2010 the Security Council imposed sanctions on Iran’s oil and financial sectors because of concern that the country’s nuclear program was designed to create atomic weapons. Iran says it is meant for peaceful purposes. Some of the sanctions were lifted in 2013, but negotiations on a comprehensive deal are still being conducted in Vienna. The deadline for a deal is Nov. 24.
Three days later OPEC will hold a summit, also in Vienna, the cartel’s headquarters, to discuss production levels for the coming year. Global oil prices have dropped by around 30 percent since June, a four-year low, putting economic pressure on many oil producers. An abrupt rise in Iranian exports would only worsen the pricing problem.
Yet Saudi Arabia, OPEC’s biggest and therefore most influential producer, has ignored pleas from some fellow members, especially Venezuela, to call for a cut in the cartel’s oil production to shore up prices. Venezuela has even approached non-OPEC producers, including Russia, for help in devising a plan to reverse the price drop.
The sanctions have had a huge impact on Iran’s oil production. In 2008, it generated more than 4 million barrels of oil a day. But by October 2014 it was producing only 2.77 million barrels a day, according to an analysis by Bloomberg News. The question is whether Iran can double that output quickly, as Zanganeh says.
Some analysts believe the minister is exaggerating Iran’s ability to resume production, especially if the sanctions on its energy sector aren’t among the first to be lifted – if the sanctions are lifted at all.
“Zanganeh is being too optimistic in his assessment," said Amir Handjani, an oil analyst in Dubai. He said doubling output could take as long as five years.
Richard Mallinson, an analyst at Energy Aspects Ltd. in London, agreed. “I don’t expect to see much more Iranian oil returning to the market in 2015,” he said in an e-mail to Bloomberg News. “Iran faces technical challenges increasing output and needs foreign investment and expertise.”
It all hinges on Iran’s talks with the P5+1. On Nov. 20 in Paris, en route to Vienna, Secretary of State John Kerry said he was optimistic about reaching a comprehensive deal that would lift the sanctions, even though there are few visible signs of progress. And he ruled out extending the deadline for a settlement until March.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com