Iran’s future is more in gas than in oil: expert

November 15, 2015

TEHRAN - Hossein Askari, a professor of international business, says Iran should focus more on gas export rather than oil as the country is gifted with huge reserves of gas and the world is also embracing gas and renewable energies.

Askari, who served as special advisor to Saudi finance minister from 1978 to 1981, said Iran cannot compete with Saudi Arabia in terms of oil exports even when the sanctions against the country are removed, noting that Iran’s oil industry is in need of large investment .
“If Iran is looking to boost revenues dramatically from oil sales, it will be disappointed.”
He said it is better that Iran “look more towards natural gas and developing its non-energy exports.”
“Iran’s future (and its sales to Europe) is more in gas than in oil,” Askari said in an exclusive interview with the Tehran Times.
Following is the full text of the interview:
Q: Saudi Arabia is increasing its oil exports to European countries. What will this decision mean for Iran’s share in this market? Iran says the decision has no impact on its share of the European oil market. Do you agree with this view?
A: Let me start out by saying that the oil market is global. I realize that most refineries are configured to handle a particular blend of crude, but crude oil exports can be shifted around over a period of a few months. Having said this, I must respectfully disagree with whoever said that Saudi policies will not impact Iran’s market share in Europe. Saudi Arabia is a much bigger market player than Iran on the global stage. Iran, no matter what it does, cannot reach Saudi Arabia’s level of exports under any imaginable scenarios. Moreover, it will take Iran time and tens of billions of dollars of investment to ramp up exports by 2-3 MBD. For now, over the next 12 months, Iran can ramp up exports by about 500,000-1,000,000 after sanctions are lifted. Iran can sell this extra output but it will put further downward pressure on oil prices.
Q: Iran says in the aftermath of the sanctions there are no obstacles in regaining its share of the oil market in a short time. What is your analysis?
A: Again, as I have said, I do not believe that Iran can increase its exports by more than 1 MBD in 2016. This is due to the conditions of Iran’s oil fields. This extra output, it can sell. It does not matter to whom (Europe or Asia). To who it sells it to is not the key point. The point is that with increased Iranian oil exports, prices may decline further. I say “may” because some of this increased Iranian exports is already priced into futures prices.
Q: In general what will be the impact of Iran’s return to the oil market? Will we see a further decrease in oil prices?
A: I think that this is the crucial point. As I have said to you over the last two years, I see oil prices firmly in the $40-$60 range until at least 2020; and possibly lower than $40 if market conditions deteriorate significantly. This I have said consistently for what I see as market conditions, environmental considerations, Iran’s drive to increase output post sanctions and regional politics. First, market conditions can be expected to be weak because of slow world economic growth, and possibly another global recession as China falters and sustained growth in Europe does not materialize. Moreover, the impact (output) of shale oil and gas will be with us and re-enforce abundant oil and gas supplies. Second, I believe that there will be a renewed push to contain the carbon footprint. While there will be much pressure on coal, there will also be pressure on oil. The push will be towards natural gas and even more towards renewables. Iran’s future (and its sales to Europe) is more in gas than in oil. Third, I think Iran will do all it can to attract foreign companies (and banks) to finance Iran’s increased production capacity, and as a result, its exports will increase over the 3-5 year time frame. At the same time, Iraq will do the same, if peace can be restored. Fourth, and finally, there is no hope of an OPEC agreement to restrict output. The political differences and reasons for no cooperation between the (P)GCC on the one hand and Iran and Iraq on the other hand are simply too great. So if Iran is looking to boost revenues dramatically from oil sales, it will be disappointed. It better look more towards natural gas and developing its non-energy exports.

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“If Iran is looking to boost revenues dramatically from oil sales, it will be disappointed.”


“There is no hope of an OPEC agreement to restrict (oil) output.”