Tehran committed to regain share in world market

By Sara Rajabova - AzerNews

Iran is strongly committed to regain its share in the world market once the international sanctions imposed on the country over its nuclear energy program are lifted.

Islamic Republic’s Oil Minister, Bijan Namdar Zangeneh, said on August 26 that Iran would not give up its quota in OPEC and its share in world market, IRNA news agency reported.

Iranian authorities assert that once sanctions are lifted, the country could double exports within two months.

Though sanctions have not yet been lifted, speculation over Iranian production has already triggered a significant drop in global oil prices.

The price of oil has plunged from about $108 in the first half of 2014 to a current price of about $40 per barrel.

Brent crude prices slumped below $45 a barrel for the first time since 2009 and continue to hover close to this price today. The slump is causing difficulties for oil-exporting countries.

Oil prices are expected to keep falling if the U.S. Congress approves the P5+1-Iran nuclear deal, even if it were months or years before any Iranian oil supplies actually reach the market.

Zangeneh, however, said Iran will increase exports even if oil prices fall.

“Iran will by no means ignore its quota in OPEC and the world oil market. We have no problem with slashing oil prices on the global market because we can double our oil exports. We should bypass the tyrannical conditions imposed on our country because maintaining Iran’s quota in OPEC and the world market is among our vital parameters,” Zangeneh said.

Iran several times requested that OPEC make room for exports from the Islamic Republic once the sanctions are lifted.

However, the experts consider that OPEC, which is mostly coordinated by Saudi Arabia, is unlikely going to cut its oil production to make room for Iran.

“Therefore, if and when Iranian oil exports begin to come back to the market, they should put further downward pressure on prices," according to a report by macroeconomic research company Capital Economics released on August 20.

Capital Economics claimed OPEC’s Gulf members have so far been adamant that they would not cut production to support prices, despite calls from other members, especially Iran.

“There is no reason for them to change this stance once Iran resumes higher oil exports. Indeed, the return of Iranian exports may actually reinforce OPEC’s ‘no output cuts’ stance, putting even more pressure on U.S. shale producers,” the report said.

Noting that OPEC should reconsider current oil production, Zanganeh said OPEC members have been asked to hold an extraordinary session should all 13 members agree to it on consensus.

He said certain OPEC members are trying to harm other members through suppressed prices as a result of oversupply.

OPEC has resisted so far decreasing output despite drooping prices, while Iran has accused some Gulf States of following political objectives through keeping the oil price down.

On the other hand, some experts believe that once Iran starts to supply the market with its surplus crude output, OPEC will be forced to adapt itself to protect prices.

Parviz Mina, who served on the OPEC Long-Term Strategy Committee, told Trend that when Iran starts increasing output, OPEC countries will take new actions to cut production in order to protect prices from falling further than what they are today.

Iranian oil production has fallen by over 1m bpd since the imposition of the latest round of sanctions at the start of 2012.

Iran pumped 3.6 million barrels of oil a day last year, down from 4.4 million in 2011, according to BP Plc data. The Islamic Republic produced 2.85 million barrels a day in July, according to the Bloomberg data.

The country indented to increase output by 500,000 barrels a day after sanctions are lifted, and another 500,000 barrels after that.

"Iran does have considerable quantities of crude oil in storage, both on land and at sea, which could be sold as soon as sanctions are lifted. But little is known about how large these stockpiles actually are. Estimates range from 10m to 40m barrels, which would allow Iran to double exports between a week and a month before increased production would need to take over," Capital Economics estimated.

Iranian officials have also claimed they would increase production to pre-2009 levels of around 4m barrels per day within about three months.

However, such an increase in output doesn’t seem real, as it would take a considerably longer period of time to renovate Iran’s ageing infrastructure.

"Three months may prove to be a bit too ambitious, given that many of the country’s oil fields are aging and will require a significant amount of time and money to return back to the full production. However, Tehran is already in talks with major oil companies about exploiting its remaining reserves," according to the report by Capital Economics.

In the meantime, Zanganeh said the government hasn't allocated any financial resources to develop its oil and gas industry due to a fall in the price of oil in current year.

Zanganeh said during the fiscal years 2011 and 2012 Iran invested $40 billion in oil and gas projects in total, while in 2013 and 2014 this figure plunged to $10 billion and $6 billion, respectively.