Iran Plans to Increase Oil Production

Ali Kardor’ statement was not unexpected. Back in January 2017, Saeed Khoshroo, Deputy Managing Director of the Iranian National Oil Company, announced plans of the government to increase production to 5.7 million barrels per day, including 1 million barrels of gas condensate, Nina Mamedova, Chair of the Iran Section, Institute of Oriental Studies of the Russian Academy of Sciences, told www.valdaiclub.com.

How realistic are these plans? Prior to the actual sanctions, Iran produced more than 4 million barrels per day (including up to 0.5-0.7 million barrels of gas condensate). In 2011, i.e. before the Iranian banks were cut off from the SWIFT system, which provided the bulk of payments for oil export supplies, Iran produced 4.46 million barrels. After many oil and gas companies, including the Russian Lukoil and Gazpromneft companies quitted Iran, oil production growth prospects worsened. Third-country companies were hit hardest by the US energy sanctions. The US tightened control over the activities of foreign oil and gas companies in Iran.

EU sanctions regarding the purchase of Iranian oil have also narrowed the capabilities of the NIOC not only in the development of new fields, but also in maintaining production on the existing ones. Iranian oil reserves make it possible to increase the production of crude oil not due to the resumption of production from existing fields, but due to the development of new ones. These are deposits of West Karun-Yadavaran, Mansuri, Yaran, South and North Azadegan. Western and Russian companies such as Lukoil, Tatneft, Gazpromneft, Rosneft are showing interest in them. These companies, as well as the biggest foreign companies (Total, Eni, several Chinese companies, etc.) are included in the list of tender participants for the development of oil and gas fields based on the "new oil contract" principle. This new type of contract gives more rights to project participants than "buy-back" principle, previously used and still available. Iran is interested in the participation of Russian companies, but on the terms of common competition. As relations between Iran and the United States are worsening, the chances of Russian companies grow. But, on the other hand, their positions weaken as the relations between Russia and the United States further deteriorate.

The main problem is the US position, which wants to preserve the energy sanctions. Therefore, the announcement of a tender on new terms is constantly postponed, for already a year. Much will depend on Trump's position on Iran's compliance with the terms of the nuclear deal. The IAEA report gave a positive assessment, and by the end of the year Trump will declare his own position.

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