August 24, 2020 [S&P Global Platts] – Iran’s state-run companies have signed 13 contracts with local contractors that aim to raise oil production by over 180,000 b/d, as part of the country’s policy to be in a position to regain lost market share once sanctions against its energy sector are lifted, oil minister Bijan Zanganeh said at the signing ceremony Aug. 17.

“These projects bear a message right now that we work under the sanctions… some would ask me whether it’s necessary to create production capacity while you have surplus capacity and you cannot use the capacity fully under the sanctions,” Zanganeh said.

“The sanctions are temporary… the power of a country in the oil market doesn’t come from its reservoirs, rather from its production capacity,” he said.

“When someday the sanctions are lifted, would we want to start repairing our wells, build new wells which will take two, three years? In this two, three years, all our share is gone. Like the last time, our production should reach the previous level within less than three months to gain our share back,” he said.

On the sidelines of the ceremony, Zanganeh was asked about OPEC’s strategy to stabilize oil prices.

“In my opinion, OPEC over this period was practically successful at its job because Brent [crude] has arrived from around $15-$16/b in May at $45/b now… And it has been almost stabilized. There is no pressure to push it down,” he said.

“But whether they would want to raise or cut [output] depends on the market reaction. Of course, the coronavirus situation is very important. If the world economy recovers… demand for oil will increase and the gap between supply and demand decreases, and this will impact prices positively,” Zanganeh said when asked whether OPEC should continue the current policy.

Asked about the recent incident with the US seizing tankers shipping Iranian-origin oil products to Venezuela, Zanganeh said: “Please don’t talk about Venezuela at all. It was a merely commercial deal. Don’t turn it to a political battle. The cargoes that the Americans have seized had gone from Iran. But neither the tankers nor the contents belonged to us.”

“The cargoes had been sold FOB and the US announced a victory of taking the cargoes… the gasoline was originally Iranian but it didn’t belong to Iran. Its money has been settled too,” he added.

BIGGER PACKAGE

The Eur1.527 billion contracts signed are the second part of a bigger package for a total production rise over 280,000 b/d from 33 fields, Masoud Karbasian, managing director of National Iranian Oil Company, or NIOC, said in a speech before the signing.

The 13 projects were awarded by the National Iranian South Oil Company, or NISOC, and the National Iranian Offshore Oil Company, or NIOOC, to 14 companies.

The first and second package contracts will be completed within two and a half years from signing and envisage drilling 165 new wells and repair of 71 existing ones. The first stage of the plan involved 10 contracts worth Eur740 million signed in 2019 with a 75,000 b/d oil production target.

“The physical progress of the first stage is 25% and is acceptable given the circumstances,” Karbasian said.

Karbasian hoped that the third part would be finalized and signed in the current Iranian year (by end of next March), with tenders for the other 10 projects already held.

The local content in these projects is due to top 80% from the current 70%. Direct investment for the 33-field package would stand at $6.2 billion.

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