18-10-2016

Iran Boosting Oil Production in Possible Hitch to OPEC Deal

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Iran, OPEC’s third-biggest member, plans to boost its oil output to 4 million barrels a day this year, potentially complicating the producer group’s plan to cut supply in an effort to prop up prices.

Oil Minister Bijan Namdar Zanganeh said he hopes the Organization of Petroleum Exporting Countries will agree next month at a meeting in Vienna to limit output. Iran is seeking about $200 billion of investment in its oil, natural gas and petrochemicals industries to raise production and sales, according to figures Zanganeh presented Monday at a conference in Tehran. The country is targeting an average daily output of 4.28 million barrels of crude and 1 million barrels of condensate within four years, he said.

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OPEC members will meet next month to seek agreement on how to put into effect a planned cut in the group’s output. OPEC decided last month in Algeria to reduce its collective production to between 32.5 million and 33 million barrels a day to rein in a global glut and support prices, though it may exempt Iran from any cuts. Iran lost its position as OPEC’s second-biggest producer after international sanctions were tightened in 2012 and has defended its steps to ramp up output to return to prior levels.

“The difficulty in implementing the deal will be with the potential for production increases within OPEC,” Giovanni Staunovo, a commodities analyst at UBS Group AG, said by phone from Zurich. “It may also be a bargaining chip, as what everyone wants is to get into the OPEC talks with a higher level of production from which to cut or freeze.”
Production Plans

Iran aims to raise production from 3.89 million barrels a day currently, Ali Kardor, managing director of National Iranian Oil Co., said at the conference in Tehran. Amir Hossein Zamaninia, deputy oil minister for international affairs, told reporters the country pumped 4.085 million barrels a day before sanctions were imposed on its economy. “We need to reach pre-sanctions production levels,” he said.

Iran pumped 3.63 million barrels of oil a day in September, data compiled by Bloomberg show. The country is producing at full capacity and aims to raise exports to 2.5 million barrels a day by March, Kardor said. Iran currently exports more than 2.2 million barrels a day, Zamaninia said.

“We should decide in November how much every country should produce,” Zanganeh said. He didn’t comment on Iran’s participation, if any, in the OPEC agreement.
Data Questioned

Kardor disputed the accuracy of OPEC’s data on the country’s production. Figures based on estimates from secondary sources such as analysts and journalists are “not acceptable” for use in determining the country’s output quota, he said. The accuracy of OPEC’s secondary-source data is important because the group may use the information to set individual member quotas.

Iran is ramping up efforts to woo foreign investment in an energy industry stunted by years of sanctions. NIOC on Monday began soliciting documents from international companies to pre-qualify as bidders to develop the country’s oil and natural gas fields, according to an announcement posted on its website. Interested companies will have until Nov. 19 to submit their qualifications, and the government will publish a list of eligible bidders on Dec. 7, according to Shana, the Oil Ministry’s news service.

The country may tender the first field, the South Azadegan deposit, to international companies as early as November, NIOC Managing Director Kardor said. Total SA of France had been developing a technical program for development of the field after signing a data-sharing agreement with Iran earlier this year, Kardor said. NIOC signed 10 agreements giving foreign companies access to data on its fields with the aim of bringing in partners to boost output, he said.

Total is also in the running to develop Iran’s South Pars 11 gas development, Kardor said. A first oil development agreement with an international company could be signed by March for South Azadegan, he said.

Source: Bloomberg

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