Tehran: Iran is beginning efforts to boost oil production and exports amid a global supply glut after the removal of sanctions that shackled its economy and capped crude sales.
The Gulf country is targeting an immediate increase in shipments of 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said on Sunday in an interview in Tehran. Iran plans to add another half million barrels within months. The additional sales will push crude prices lower as markets are already oversupplied, said Robin Millsof Dubai-based oil consultant Qamar Energy.
“The Oil Ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran’s crude exports by 500,000 barrels,” the official Islamic Republic News Agency reported. Zamaninia said the plan is “still valid” and will be done in a “managed way to minimise the negative impact” on prices.
Buyers of Iranian crude are free to import as much of the country’s oil as they want after the International Atomic Energy Agency determined that the country had curbed its ability to develop an atomic weapon.
As holder of the world’s fourth-largest reserves of crude and biggest deposits of natural gas, Iran gains immediate access to about $50 billion in frozen accounts overseas, funds the government says it will use to rebuild industries. It also opens the door to foreign investors such as Total and Eni.
Once the second-biggest producer in the Organisation of Petroleum Exporting Countries (Opec), Iran is now the fifth-biggest in the 13-member group. The country’s oil exports fell to an average of 1.4 million barrels a day in 2014 from 2.6 million barrels daily in 2011, the year before the United States and European Union intensified sanctions, the US Energy Information Administration said in June.
“There’s still the cloud of uncertainty around how much Iranian crude will come to market and when,” said Mills, Qamar Energy’s chief executive officer. The global price impact of more Iranian barrels will depend on how aggressive the country is in offering discounts and how quickly it ramps up sales, he said. Mills expects Iran can raise output by 600,000 a barrels a day over the next six months and add as much as 800,000 barrels of daily output this year.
President Hassan Rouhani said Iran’s financial resources will ‘increase significantly’ after its compliance with the terms of an accord to curb its nuclear program paved the way for the removal of crippling economic sanctions.
The International Atomic Energy Agency (IEA) concluded on Saturday that the Islamic Republic had curbed its ability to develop an atomic weapon as required under the July accord with world powers. The US and five other nations agreed to lift economic sanctions related to Iran’s nuclear program “simultaneously with the IAEA-verified implementation” of the deal.
“The shackles of sanctions have been removed and it’s time to thrive,”’ Rouhani said Sunday on Twitter. Addressing parliament later in a televised speech, he said it’s up to Iran to “seize the opportunity for an economic leap.”
Most US companies will be on the sidelines because the deal lifts only those sanctions imposed on Iran to punish it for its nuclear programme. It doesn’t touch the sweeping ban on US trade and investment with Iran put in place by the Clinton administration in 1995.
Rouhani, in his speech, said Iran aims to attract at least $30 billion a year in foreign direct investment over the next five years. Iranian stocks headed for the highest level in more than five months, climbing 1.5 per cent to 65,829.7 as of 10:34am in Tehran.