High oil prices ‘hurting Iran exports’
Dubai, August 25, 2013
Iran's oil exports are being hurt by current high prices that make it more economical for rivals like the US to produce more costly oil, Iran's new energy minister said in an interview published by his ministry's website.
A week into the job, returning oil minister Bijan Zanganeh, who previously filled the post under the reformist president Mohammad Khatami, told oil ministry news service Shana that current prices of over $106 a barrel were a worry.
His comments represent a shift in stance from those of Iran's previous oil minister who repeatedly said he wanted oil prices to remain above $100 and played down the impact of sanctions on exports.
"The crude price increase to this level represents both opportunity and threat... It is an opportunity for us to increase our revenues (but) high oil prices also represent a threat for our country, because our rivals can produce oil at high price and supply it on the market," Zanganeh said.
Benchmark Brent crude oil prices have largely remained above $100 per barrel since early 2011, spurring a surge in production of relatively costly shale oil in North America.
That has helped swell global oil supplies, enabling Washington to tighten restrictions on Iranian oil exports without causing a price spike that might threaten global growth.
"Today, the U.S. is investing mainly in shale gas and shale oil production...with these prices, shale gas and shale oil production will be economical for them," Zanganeh said, adding he did not expect any drastic change in oil prices in the third quarter of 2013.
He said that he was optimistic that the new Iranian government, which has adopted a more conciliatory stance in its nuclear standoff with Western powers, could revive oil exports.
"Given the present circumstances, we are facing myriad challenges to exports, but we have to try our best to increase oil exports," he told Shana. "Despite challenges we are facing ahead, Iran's oil exports will increase in the near future."
Even with oil hovering above $100, Tehran has found it impossible to balance its budget as export volumes have plunged. The U.S. government estimates that Iran's oil revenues fell from $95 billion in 2011 to $69 billion in 2012.
Iranian oil output fell by 678,000 barrels per day (bpd) in 2012, according to statistics from BP, as Western pressure intensified on Asian buyers of Iranian oil. By contrast, U.S. oil output increased by over 1 million bpd over the same period.
Iran holds the world's fourth-largest proven oil reserves and the largest natural gas reserves. But restrictions on foreign investments and technology sales have stunted energy sector developments. Even before sanctions made it nearly impossible for most foreign companies to operate in the isolated Islamic republic, Tehran's insistence on paying contractors back in oil made projects unattractive to foreign investors.
Iran began offering more attractive terms in early 2013 to win the investment it craves for its decaying energy sector, but close scrutiny from Washington and Brussels has put off most international investors.
Zanganeh said he would increase efforts to attract investments from abroad but did not go into any further detail. – Reuters