‘Iran oil output may jump sharply post-sanctions’

LONDON — Iran could raise its oil output by as much as 730,000 barrels per day (bpd) from current levels fairly quickly after sanctions are removed, the International Energy Agency (IEA) said this week.

The West's energy watchdog estimated that Iranian oilfields, which pumped around 2.87 million bpd in July, could increase production to between 3.4 million and 3.6 million bpd within months of sanctions being lifted.

"While significantly higher production is unlikely before next year, oil held in floating storage, at the highest level since sanctions were tightened in mid-2012, could start to reach international markets before then," the IEA said in a monthly report.

Iranian Oil Minister Bijan Zanganeh has said Iran expects to raise oil output by 500,000 bpd as soon as sanctions are lifted and by a million bpd within months.

Iran's July production figures were 50,000 bpd higher than in June, the IEA remarked.

The report by the Paris-based IEA suggested any increase in output would probably be more modest than Iranian estimates, and said the Islamic republic would require massive investment to raise output capacity.

Iran has said it hopes to secure nearly $200 billion worth of oil and gas projects with foreign partners by 2020.

Iran and six world powers agreed a deal in July to curb Tehran's nuclear programme, but sanctions imposed in 2012 will not be lifted until Iran has complied with all the terms of the pact, and the agreement has to be ratified by the US Congress.

This is not expected before the end of December and analysts say they may still be in place at the end of the first quarter of 2016.

"My sense is that really long-term contracts still won't be in place until maybe mid-2016," Richard Nephew of the Centre on Global Energy Policy at Columbia University, New York, told Reuters Global Oil Forum.

Iran's economy contracted 6.6 per cent in 2012 and 1.9 per cent in 2013, after new rounds of economic sanctions were imposed, according to World Bank data.

The World Bank expects Iran's economy to grow 5 per cent in 2016 after a 3 per cent increase this year.