Azernews.Az

By Fatma Babayeva

Iran is unlikely to fill the market with cheap oil in the future, reports Russia’s independent national energy sector adviser VYGON Consulting.

The prospect of Iran’s return to the European market is the most important issue in terms of influence on the global oil balance, says the company report “Russia, U.S. or OPEC? Who influence oil market?”

After the imposition of an embargo on Iran’s oil imports to the EU and a ban on insurance of tankers in 2012, the country’s oil production declined by roughly one million barrels per day, the company analysts said.

Meanwhile, the figures on the statistics of Iran’s oil production significantly differ from each other.

The report states that OPEC estimated oil production volume in Iran to be at 3.13 million barrels per day in February. However, the number provided for the same period by the International Energy Agency was 3.22 million barrels per day, and the U.S. Energy Information Agency said it to be 2.95 million barrels per day

The variation between the estimates on Iran’s oil output amounts to 270 000 barrels per day or half of the potential growth of the world oil production in 2016, the analysts said.

The report indicates that Iran depleted half its spare capacity since January 2016 when international sanctions were lifted to March by reducing it 0.4 million barrels per day in February.

That’s why, a return to pre-sanction levels of the extraction of 4 million barrels per day is unlikely, according to the report.

In 2015, Iran's oil production stood at 2.8 million barrels per day, and the production of condensate was about 0.6 million barrels per day.

Analysts of VYGON believe that there are several constraints hindering increase of Iran's oil production and oil exports in the future. The first reason is the uncertainties existing in the investment environment and working conditions in the oil and gas sector of the country.

Moreover, the report states that Iran is in no hurry to increase its presence in the European market when oil prices are low. The country refuses making discounts to the companies and offers to sign old types of contracts which include a clause about re-export ban.

In the next few years, analysts expect moderate growth in the oil production of Iran - 0.6 million barrels per day by the end of 2016, and similar pattern for 2017.

Recently, Iranian Petroleum Minister Bijan Namdar Zanganeh said that Iran has signed a contract for the supply of 700,000 barrels of oil per day to the European market.

Zanganeh previously noted that Iran exports from 1.7 million to 1.75 million barrels of oil per day.

The EU used to import 800,000 barrels oil and condensate from Iran before sanctions imposed in 2012.

Iran expects to increase crude oil sales to Europe over 300,000 barrels per day once the all contracts signed with European countries is realized.

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Fatma Babayeva is AzerNews’ staff journalist, follow her on Twitter: @Fatma_Babayeva

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