Setting Iran's budget on $72/barrel "unrealistic"

Business Materials 11 December 2014 15:12 (UTC +04:00)

Baku, Azerbaijan, Dec. 11

By Dalga Khatinoglu

Former director general of the National Iranian Oil Co. (NIOC), the entity that is responsible for exporting the country's oil, says setting Iran's next year budget based on $72/barrel is "so high" and "unrealistic".

Iranian government submitted the $293-billion budget bill to Parliament on Dec.7. The budget of funding for running the government is $93.7 billion. The reliance of next fiscal year's funding for running the government budget on oil revenues was reduced from the current 45 percent to 31.5 percent. The government expected to export 1.3 mbpd of crude oil and condensate at $72/barrel during next fiscal year, unchanged in volume, but decreased by 28 percent in value compared to the current budget law.

Former DG in NIOC Mahmood Khaghani told Trend Dec.11 that setting the budget at around $60/barrel is more realizable.

Iran's current oil export is around 1.2 million to 1.25 million barrels per day, while the OPEC oil basket price slipped to $61.35, on Dec.10, shows up to 43 percent decline with comparing mid-June's price.

Iran's fiscal year starts on March 21.

Mahmood Khaghani, who is now retired, but served 33 years in the Oil Ministry in various posts, such as the head of the ministry's Caspian Sea and Central Asia Department, said that current global oil prices would likely decline further until reaching a point that a balance between supply and demand in global oil markets are achieved.

"I think the output of balanced point is $60/barrel, because prices slipping below this level will make part of global oil production projects unprofitable and they will have to cut production," Khaghani said.

According to the latest report, published by OPEC on Dec.10, the current global oil demand is projected to be 91.13 mbpd, while the supplement in November was 92.69 mbpd. For 2015, the demands would reach 92.26 mbpd, while demands for OPEC crude would be 28.9 mbpd, 1.15 mbpd less than the Cartel's November output.

Parviz Mina, who served as a member of OPEC Long-Term Strategy Committee, told Trend Dec.10 that regarding this fact, OPEC has kept output ceiling level unchanged at 30 million barrels per day, while the cartel's 12 members are producing even more than this level, there is not any positive forecast in an oil price increase in the short term.

"In case the US continues tight oil production and increases the volume, I think the oil prices could plunge around $60 in 2015," Mina said.

Iran's petroleum export revenues ($ billion) based on the Central Bank of Iran's statistics

Iranian government increased the share of tax revenues by 20 percent to $23.15 billion. On the other hand, the official US dollar in next year's budget was considered at 28,500 rials, 1,750 rials more than the current figure.

Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service
Follow him on @dalgakhatinoglu

Edited by CN