Zamaninia Says Iran Reviving Oil Output to Pre-Sanctions Levels

On the sidelines of the oil exhibition, Amir-Hossein Zamaninia, Iran's deputy oil minister for trade and international affairs, said Iran could restore its pre-sanctions production capacity within a month or two as OPEC would accommodate its oil.

"It was close to 4 million barrels, 3.9 million and something... naturally for Iran there is a consideration [within OPEC] because of these sanctions so that it can catch up and get to the pre-sanctions [production] level," said Zamaninia, who is also Iran's OPEC governor.

Raising production capacity

The Iranian government is eying exports of 2.3 million b/d of crude in its next year that starts March 21. "The last experience showed that they [OPEC] make room for Iran's maximum production capacity," Zamaninia said when asked about a recovery of oil exports and production capacity. "As it was done last time, we expect the same this time too... It will certainly be a significant challenge but we will do our best and we hope to reach this point within a month or two.'' Speaking to reporters on the sidelines of the event, Zamaninia confirmed that Iran has already increased production when asked.

Asian and European companies, he said, have started making contact with Iran ahead of the possible removal of sanctions that isolated the country's energy industry. "Well, for some weeks we have had contacts expressing readiness. Europeans, Asians, but no American companies. These contacts were over upstream [projects] and purchase of equipment," Zamaninia said.

Zamaninia said oil product exports sales included gasoline, jet fuel, mazurka, diesel, and fuel oil. "Under the Obama administration, exports of gasoline were sanctioned. But we are the biggest gasoline exporter of the region. We export everywhere, both within region, East Asia and Venezuela too," he said. Zamaninia said Iran has also been holding talks over an unspecified oil-for-vaccine deal, but did not provide further details.

While hopes are pinned on the Biden administration opening ways for international investors and contractors into the underdeveloped industry, Iran's oil exhibition has seen no foreign participation because of the COVID-19 pandemic, the organizers said. The event is held every year in the spring but was postponed because of the pandemic. Some 550 Iranian GC, EPC, and E&P companies have taken part in the four-day event.

President Joe Biden is expected to seek the restoration of that accord and officials in Tehran have expressed the hope he will ease restrictions on its petroleum sales. But for now, the sanctions are still in place and any buyer of Iranian crude would face the same legal and financial penalties that have deterred most potential customers over the past few years.

Zamaninia declined to specify the current level of Iran’s oil exports, but said the numbers were “much better than many assume,” while Oil Minister Bijan Namdar Zanganeh said shipments have increased “dramatically.” Oil analysts viewed the announcements with skepticism.

“I find this premature,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Possible buyers of Iranian oil are likely to wait for an agreement, and an end of the sanctions.”

Sharply Down

Output stood at 1.99 million barrels a day in December, down by almost 50% compared with the months before Trump’s move, according to Bloomberg estimates. Many Iranian oil tankers switched off their transponders soon after the measures were announced, making it harder to quantify the impact on exports.

Biden’s Treasury Secretary nominee Janet Yellen said Thursday that the U.S. would only provide sanctions relief if Iran resumed its commitments under the nuclear deal. Tehran, which has been ramping up its nuclear activity in defiance of U.S. pressure, has said it wouldn’t restore its compliance until sanctions are lifted. Announcing strong export levels and ambitious targets could be part of the negotiating process.

Kpler Ltd., a market intelligence firm, said that Iran’s recovery will depend on three elements: the readiness of Biden to reactivate the nuclear deal, the country’s technical ability to revive production, and the willingness of customers to resume purchases. “Iran has demonstrated in the past a very strong ability to bring oil back to the market, although we think that one-to-two months is very optimistic,” said Alex Booth, Kpler’s head of research.

China already showed some readiness to continue purchases from Iran even at the height of sanctions, and Indian customers could return too, Booth said. Production cuts by Iran’s counterparts in OPEC+, such as Saudi Arabia, may have created a gap for the Islamic Republic to fill, he added.

Iranian output has been edging higher recently, analysts who track tanker loadings say. Petro-Logistics SA in Geneva estimates supplies have gained about 50,000 barrels a day in January, and SVB Energy International LLC sees an increase of about 36,000 a day.

Oil Minister Bijan Namdar Zanganeh said in December that the government sought to double oil production and increase exports to 2.3 million barrels a day.

“Iran’s bold claims on recovering oil exports in weeks don’t really stand up to scrutiny,” said Bill Farren-Price, a director at research firm Enverus. “But it does show that Iran is keen to test the U.S. commitment to the sanctions. Tehran just put nuclear diplomacy back on the front burner.” - Platts, Bloomberg