Iran should boost oil output to 6.5 mil b/d under new govt: Zanganeh

Iran could "easily" boost its oil production capacity to 6.5 million b/d, Iran's Oil Minister Bijan Zanganeh said May 31, as US, Iranian and European negotiators are set to convene this week for more talks over reinstating the nuclear deal.

"We can easily reach 6.5 million barrels per day," Zanganeh said at a ceremony to award studies on the country's giant Azadegan oil field, the oil ministry's Shana news service reported. At the ceremony, Ali Aghamohammadi, who is a member of Iran's arbitration body Expediency Council, noted that Iran has long-term goals of using more crude output domestically for refined products, which in turn can be exported at higher margins.

"After exploitation of oil, we can process it in petro-refineries. Increasing the output doesn't mean selling oil in crude," he said.

Iran is scheduled to hold its presidential election on June 18 and Zanganeh has said he won't stay in office under the new administration.

"My advice to the upcoming government is to prioritize oil output increase to a total 6.5 million b/d," Zanganeh said. As pressure builds to curb environmental damage from oil and gas, he added: "It wouldn't take long that conventions will come to restrict oil production and will not allow countries and government produce oil. Therefore, until we have time, we should raise oil production capacity because international restrictions will become problematic for us. We should quickly accelerate our production."

Iran's President Hassan Rouhani has said that a "main agreement" on the nuclear deal has been reached, with the US broadly committing to lifting its sanctions targeting Iran's oil, petrochemical, shipping, insurance and banking sectors. While Iran's oil production of 2.43 million b/d in April is the highest since May 2019, according to the latest S&P Global Platts survey, sanctions on Tehran's energy industry have severely limited oil production. In 2017, Iran's output averaged 3.79 million b/d, according to the Platts survey.

"Don't say there is no market for oil," Zanganeh said, noting that Iraq used to never pump more than 3 million b/d but now it's producing more and finding buyers for it.

Iranian crude and condensate exports were averaging as high as 2.90 million b/d in early May 2018, when the US under the Trump administration withdrew from the Iran nuclear deal

Since then, exports have fallen below 1 million b/d in some months, though volumes have rebounded somewhat. Iran's heavy sour grades compete directly with crudes such as Saudi Arabia's Arab Heavy, Arab Light and Arab Medium; Iraq's Basrah Light, Basrah Medium and Basrah Heavy; Russia's Urals; the UAE's Upper Zakum; Oman Crude Blend; Kuwait Export Crude; Venezuela's Mesa 30 and Merey 16; and Mexico's Mata.

Azadegan project

At the ceremony, the National Iranian Oil Co. signed an agreement with five exploration-production companies to consider how to boost oil recovery rates at Azadegan oil field, with $4.5 billion of financing needed, Zanganeh said. Azadegan oil field straddles the border with Iraq's Majnoon oil field and has an estimated 32 billion barrels of oil in place.

The domestic companies involved are Persia Oil and Gas Development Co. which will study north Azadegan; Petropars and Petro Iran which will work in the center of Azadegan; and Pasargad Energy Development Co. and Dana Energy inked the agreement for south Azadegan.

North Azadegan was developed by China's CNPC and became operational with production capacity of 75,000 b/d in November 2016. State-run Petroleum Engineering and Development Co. has been developing South Azadegan with domestic contractors since 2014 after China's CNPC was expelled from the field due to work delays.

Reza Dehghan, deputy NIOC head for development and engineering, put South Azadegan's production at 140,000 b/d, according to state news agency IRNA.

"A joint committee has been set up. This committee considers integrated development of Azadegan," Dehghan said.

"With the approval of this committee, development contract can be signed with Iranian companies," Dehghan said. He also invited foreign companies to join the project.