EU advisor: Iran should've invested billions into new oil refineries

Azerbaijan, Baku, Aug. 9 /Trend S.Isayev/

Iranian government should have planned ahead, and invest 80-120 billion U.S. dollars in the new and improved refineries as well as technologies which would have enabled the oil sector to move away from the sale of crude, EU economic advisor Mehrdad Emadi told Trend.

The expert was commenting on the news about Iran considering to stop crude oil exports, and concentrate more on oil products.

Last month Iran's president Mahmoud Ahmadinejad said Iran should stop exporting crude, and focus on producing oil products.

According to Ahmadinejad, countries have been abusing the use of crude oil, and therefore it must be stopped.

Iran's president noted that today the price of oil is too much politicized, and not based on economy.

"The president's statement at best should be seen as a desire toward making the Iranian economy less dependent on the export of crude oil, that since July 1 of this year has been included in the list of sanctioned goods by the EU but also through proxy measures by other countries as well," Emadi said.

The expert noted that thus far oil products or derivatives have not been included in the list of goods subjected to international sanctions.

Iran's crude oil exports have been significantly lowered, as the sanctions started affecting the Islamic Republic.

Reuters reported that Iran's crude exports dropped to about 1.1 million barrels per day in June and July from more than 2 million bpd at the start of the year.

Iran dropped to third among OPEC's biggest producers, after holding the No. 2 spot since May 2000.

Currently, Iran is exporting 1.1 million barrels a day of oil, and some analysts forecast the figure to be dropping down more in the near future.

Mehrdad Emadi believes Iran made a mistake by not foreseeing an opportunity of investing more money into local refineries.

"This clearly has not happened and government's own sources have confirmed that there is a gap of at least $50 billion investment in the oil industry," he said.

Emadi believes if Iran wanted to move toward the sale of oil-derivatives and find the right markets that could absorb the quantity of sales, the country would have needed to generate income levels comparable to the those generated by the export of crude.

"That is a huge challenge," Emadi said.

The expert added that oil-derivative markets have a much more specialized structure and pricing mechanism which requires long term contracts.

"At this time, it will be unlikely to envisage such an achievement for Iran in the face of existing market barriers and market leaders' dominance in the market," Emadi underscored.

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