Iran likely to supply oil in parts, refrain from large exports

Iran likely to supply oil in parts, refrain from large exports

Baku, Azerbaijan, Sept. 10

By Anvar Mammadov - Trend:

Currently, Iran stores in tankers over 40 million barrels of oil, but most likely, after the final lifting of sanctions, the Islamic Republic won't immediately supply its entire stock to the world market, Maxim Edelson, senior director at Fitch Ratings, told Trend.

Edelson, who was attending the 4th Annual Azerbaijan Conference, held by Fitch Ratings in Baku Sept. 9, said that to date, Iran stores quite large oil reserves, which can be put on the market by the country immediately after the sanctions are lifted.

"But, most likely, Iran will not do this. Most likely, the country will deliver those reserves in parts throughout half a year or a year," he said.

Edelson added that Iran is also not able to quickly boost oil production, and it will take at least several years.

"Oil production in Iran is now at a low level due to the fact that they cannot export this oil," he said. "On the other hand, Iran is not quite ready now to increase production, due to technology. In recent years, Iran hasn't made enough investments in technologies due to sanctions."

Edelson added that it is necessary to invest and acquire technologies.

"Therefore, the growth of oil production depends on how quickly Iran will be able to attract investments in the oil sector," he said. "It will take at least 2-3 years, according to our estimates."

No lack of oil is observed now on the market, there is a surplus of it, so it is not profitable for Iran to enter the world market with large volumes of oil for the purpose of dumping, according to Edelson.

"Iran will surely try to conquer the market share, but there is only one "pie", which means that some countries will have to reduce their share and this will depend on the geopolitical situation a lot, according to the representative of Fitch," Edelson said.

Therefore, it is highly likely that Iran won't confront its oil producing neighbors, will gradually attract western companies, investments and increase oil and gas production, Edelson said.

He added that Iran has huge reserve of gas which it is ready to export and can use Azerbaijani pipelines for this purpose.

In order to enter the European gas market, Iran can use Azerbaijani gas pipelines running to Europe, Edelson said.

"Previously, we noted that although TAP and TANAP are mainly considered for transporting Azerbaijani gas, the pipelines' capacity can be increased for commercial interests," he added.

Edelson said that currently, Iran has already started to construct an export gas pipeline to Turkey.

"Now the country will try to enter the European market through several routes and enter the liquefied natural gas market (LNG) as well," he added.

"It is faster to build an export pipe than to enter the LNG market because Iran does not have the technologies required for LNG," he said. "The LNG market is currently well saturated, but the need will continue to grow."

"In time, Iran stated about the construction of a liquefied natural gas plant, but everything was postponed because of sanctions," the expert said. "Most likely, LNG exports will focus on the Asian market. But the situation is also complicated here. Japan is the main importer of LNG in Asia. Currently, Japan has no shortage of LNG."

"Iran's LNG will have to compete with Australian LNG in this region," the expert said. "The price "war" and a market share can happen here too. But it is necessary to take into account that this market is growing. China must be also taken into account. By the end of this decade, it will become the largest importer of gas. But the growth is still little than expected."

Edited by SI

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Follow the author on Twitter: @Anvar_Mammadov

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