How realistic is Iran’s oil budget?

Business Materials 5 December 2016 14:51 (UTC +04:00)
Iranian President Hassan Rouhani on Dec. 4 submitted the next fiscal year’s budget to the parliament on Dec.4
How realistic is Iran’s oil budget?

Baku, Azerbaijan, Dec.5

By Dalga Khatinoglu – Trend:

Iranian President Hassan Rouhani on Dec. 4 submitted the next fiscal year’s budget to the parliament on Dec.4.

In the budget, 30 percent account for oil and gas condensate revenues, remained almost unchanged year-on-year. The total budget stands at about $97 billion (1,100 trillion rials), based on a dollar rate at 33,000 rials, about 3,000 rials more than the official rate during the current fiscal year.

The amount of oil and gas export volume hasn’t been mentioned in the budget bill, but Iranian media quoted some officials as saying that the oil price has been set at $50 per barrel.

Iran’s oil and gas condensate revenues is expected to increase by 48 percent and 40 percent, compared to the current fiscal year based on rial and the US dollar respectively .

But how realistic are these figures?

Recently, OPEC reached an agreement to cut output by 1.2 mb/d to 32.5 mb/d, but Iran was not only exempted, but was also allowed to increase the output by 90,000 b/d to 3.797 mb/d in the first half of 2017.

Iran is exporting above 400,000 b/d of gas condensate, which is expected to remain unchanged in the next fiscal year. The gas condensate output is expected to increase, but the consumption also would increase due to launching of the first phase of Persian Gulf Star refinery which would consume 120,000 b/d of gas condensate.

Iran’s oil and gas condensate export was about 1.3 mb/d during the last fiscal year, but the figure reached about 2.2 mb/d in the current year and expected to reach 2.42 to 2.5 mb/d next year.

With regards to both oil price and the export volume increase, gaining $33.6 billion of oil and gas condensate export revenues (excluding the National Iranian Oil Company and National Development Fund’s 34.5 percent share from oil revenues) is quite feasible, but not guaranteed.

Among OPEC members, Nigeria and Libya were exempted from oil decline or freeze. Altogether, these two members decreased the output by more than 1.1 mb/d during last years due to internal war, but they can resume the volume, like what they did during October.

On the other hand, OPEC expects the non-Cartel members to decrease the output by 0.6 mb/d as well. Russia obliged to share a half of this volume, but there is no clear position of other producers yet.

OPEC and non-OPEC producers would meet Dec.9 to discuss the issue.

On the other hand, the elected US president Donald Trump is expected to take harder position against Iran and tighten the sanctions on the country. The nuclear agreement is still under threat and can be violated by Iran and US in future due to increasing challenges between sides.

Share of oil export revenues in budget

Iran plans to reduce the share of oil revenues in annual budget to 20 percent by 2021, Mohammad Kordbache, the advisor of Management and Planning Organization of Iran said in an article, published Nov .23 by Shana news agency.

The share of oil revenues in the Second National Development Plan (1995-2000) was 55.4 percent, which decreased to 50.7 percent and 31.4 percent in third and fourth National Development Plans (2000-2010), but again rose to 43.2 percent in the Fifth Plan (ended in the current year).

Kordbache said that the share of oil in the budget is projected to decrease and reach 20 percent by the end of the sixth National Development Plan.

He added that, in practice, the share of oil revenues in budget has decreased to 33.2 percent during last fiscal year due to low oil price.


Dalga Khatinoglu is the head of Trend Agency's Iran news service, follow him on Twitter: @dalgakhatinoglu