Baku, Azerbaijan, Sept.25
By Leman Zeynalova – Trend:
If OPEC and participating non-OPEC countries decide to extend the oil output cut deal or agree on deeper cuts, there would be no significant impact on the European companies’ interest in Iran, Francis Perrin, energy expert, chairman of Energy Strategies and Policies (France) told Trend.
He pointed out that OPEC quotas are a short-term issue, while European oil and energy companies take their investment decisions on the basis of medium and long-term considerations.
“European companies are interested in Iran due to its oil potential but not only. Iran also has a huge gas potential and it offers numerous opportunities to European companies in downstream oil, which means refining and petrochemicals. OPEC's decisions cover only the oil production of member countries. They do not impact gas, natural gas liquids and downstream projects,” added the expert.
As far as upstream oil and gas are concerned, European oil companies are greatly interested in Iran due to the importance of its reserves, said Perrin, adding that this country holds the biggest proven gas reserves, according to the BP Statistical Review of World Energy, and is number four for oil reserves behind Venezuela, Saudi Arabia and Canada.
“It is a major factor of attractiveness, which would not be negatively impacted by an extension of OPEC quotas,” he noted.
The expert said that Iran is presently respecting OPEC decisions, but the Iranian authorities have a long-term view. Beyond the present level Tehran is targeting an oil production of around 5 million barrels per day in the next few years.
“To reach such an ambitious goal, Iran will have to cooperate with international oil companies, including European ones,” added Perrin.
He pointed out that if OPEC was able to agree on the extension of production reductions - decided in November 2016 - beyond end March 2018 the immediate consequence would be that Iran would maintain its present production level of 3.8 million barrels of crude per day.
“Oil exports would also stabilize at about 2.2-2.5 million b/d. It would not be a problem for Iran as this country reached at the end of 2016 one of its key goals, which is the return to the situation before the embargo on Iranian crude imposed by the European Union between 2012 and the end of 2015. The present crude production and export levels are the same than those at the beginning of this decade,” said the expert.
He believes that the deepening (increase) of production cuts would certainly be useful but this result is less likely.
“Several OPEC member countries would oppose such a move. We also have to keep in mind that OPEC has to agree with 10 non-OPEC states and several of them would also be reluctant to go this way. Within OPEC Iran has regularly refused to reduce its oil production because of the huge cost of Western sanctions on its economy until the partial lifting of these sanctions from January 2016,” said Perrin.
On May 25, OPEC member countries and non-OPEC parties, Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Sultanate of Oman, the Russian Federation, Republic of Sudan, and the Republic of South Sudan agreed to extend the production adjustments for a further period of nine months, with effect from July 1, 2017.
The reductions will be on the same terms as those agreed in November.
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