Jan 3, 2016, 9:23 PM
News Code: 81905769
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Iran return to int’l market won't deepen oil price plunge: Official

Tehran, Jan 3, IRNA – All domestic sectors are required to cooperate with the Ministry of Petroleum in crude exports in the post-sanctions era, said the director general for international affairs of the National Iranian Oil Company (NIOC).

Room 1424 of the ministry is going through a busy period, receiving foreign delegations and holding talks on regaining Iran’s lost export quota. Iran seeks to prepare the ground for pumping another 1 million barrels of oil per day into the global market, which is apparently a herculean task, Shana reported.

“In the post-JCPOA era, Iran should purchase its requirements only from those states that import Iranian crude and products. In case we decided to proceed in isolation, it would be absolutely difficult to reclaim our share,” Mohsen Qamsari said in an exclusive interview.

Full text of the interview follows:
Shana: Would you please comment on Iran’s latest progress in talks with oil customers?

Qamsari: During the period Western sanctions intensified, Iran did not cut its relations with its oil customers and took part in a large number of international conferences. At present, the country is experiencing a new situation in its cooperation negotiations which requires greater care and seriousness.

How is Iran going to make room for its additional barrels, given the current excess supply of 2 mb/d in the global market?

In addition to the market’s supply excess, the global oil market has undergone two other changes in the past three years. During the period, oil prices stood at about $100 a barrel, a number of nascent crude companies and producers emerged. High oil prices made it quite economical for them to increase their oil output.

Furthermore, due to an uncertainty about the exact date of the lifting of the embargoes, a number of Iran’s traditional oil customers implemented certain changes in their refineries to be able to process other crude types. Moreover, at present, due to the introduction of new methods, the type of crude is not a matter of great importance for refineries across the world. Therefore, countries are far less dependent on their traditional suppliers.

Currently we are faced with a saturated market which also witnesses a number of newly-emerging producers who will sell their products at any prices to maintain their quota. They offer incentives recklessly.

How is Iran supposed to enter such a market?

The government has a number of observations to make before returning to the market. Nevertheless, it has to tackle its budget deficit by raising oil revenues. However, we will exercise great caution to prevent from a further decline in international prices and will adopt certain methods and strategies to this end.
What methods?

Perhaps, it is not plausible to elaborate on this at present. Current prices fail to reflect the realities of the international oil market and, therefore, are not acceptable.
A number of critics maintain that oil prices witnessed a downward trend once Iran announced that it intends to raise output, does this hold true?

Iran has repeatedly announced that it is capable of raising its daily output 1 mb/d in two phases. This is a technical issue. Nevertheless, the decision on the amount of exports highly depends on the future condition of the market. We will raise our market quota steadily.

Nevertheless, I do not agree with those who find Iran accountable for the drop in international prices. Iran announced its production capacity to inform the international market of its true capability. We will adjust our output to the global market’s demand.

How does Iran plan to regain its quota?

Two strategies can be adopted to this end. We can either fight for our lost quota, which is quite possible given the methods we have, or look for new markets. For instance, India plans to purchase 2 more million barrels of oil in the near future. China is also studying the probability of raising its crude imports. We are required to grasp such opportunities.

Firstly, presence in destination markets which is a novel methods to sell oil. We have not been able to act accordingly because of the fact that our oil revenue is directly deposited in the natural treasury. For the time being, many producing companies run refineries in their consumption markets. Saudi Arabia, for example, has more than 4 mb/d of refinery capacity in foreign markets out of the 6 mb/d that it sells. It means the country does not have to market its oil as much as Iran does.

Therefore, one of the methods to ensure the country's oil sale is buying refineries in other countries but this has to be approved by the administration and the parliament. This is a method that countries like Saudi Arabia, Kuwait, UAE, the US, China and leading oil giants like Royal Dutch Shell and BP have adopted and we should not stay behind them in this field.

Secondly, Iran must buy items only from countries that buy Iran's crude oil and this is a universal norm in many countries of the world; unfortunately, in Iran, we have not acted accordingly and the ministries of commerce and petroleum as well as other state departments act individually and do not take steps in an orchestrated manner. Likewise, the NIOC has to act individually. In fact, all the country's sectors must cooperate and NIOC must not be left alone.

Are you saying that every country must buy oil from Iran in order to enter into trade with the country?

Well, interactions must be up and running. There is no reason for Iran to import goods from South Korea, for example, while Seoul refrains from buying Iran's oil. The same goes for Indians as well.

Does that mean that Indians and Koreans evade Iran's crude supplies?

A volume of the exported crude oil to South Korea is not comparable with the amount of goods Iran imports from this country; an interactions must be established between us (NIOC) and other Iranian ministries, companies and institutions [to calibrate the amount of imported goods from South Korea].

How can such an interaction be set up?

Maybe by the Central Bank of Iran (CBI)

How? Does NIOC have any proposals in this regard?

Regarding the fact that following the sanctions' removal, LCs will have to open through the CBI, the bank can be very instrumental to manage such interactions. Then, Iran will only enter interactions with countries that buy its oil; we must be wary of this method of interacting with other countries in the post-sanctions period.

Has NIOC ever tabled its proposal?

No. But we propose that a body be formed to pursue this matter in the CBI.

How much are Iran's traditional customers ready to boost their purchases?
The boosts differ. Some have said they will boost it by 10 percent while there are others that will give it a revamp and will increase their purchases by 70% after the sanctions.

Which countries will buy more?

Naturally, China and India; albeit, Iran is also considering bigger markets in like in Europe which purchased nearly half a million barrels of crude oil from Iran prior to the sanctions.

How about Turkey?

Between 10% to 60%. Turkey is one of the countries with the largest boost in its purchases from Iran.

Have you so far signed any new deals under the new contract model (IPC)?
Yes, but only with those that kept purchasing our oil under the sanctions.

Are the new customers from Asia or Europe?

Both. Iran has many traditional customers in Europe who are added by a number of newly established companies in the green continent. We are in talks with these companies to sell them oil for the first time. The talks are time-consuming for sure. I hope the talks will end before the sanctions removal.

How is NIOC planning to sell Greece crude oil?

We have started technical talks with the country already to sign fresh contracts with Athens.