TEHRAN (Dispatches) - Iran is planning a speedy increase in its oil output, a senior oil ministry official said on Wednesday, as talks continue between Tehran and six major powers to lift U.S. sanctions that have seen it pumping far below capacity since 2018.
Iran and the six powers have been in talks since April to revive a 2015 nuclear deal that former U.S. president Donald Trump exited three years ago.
“If sanctions are lifted, most of the country’s crude production will be restored within a month,” Farokh Alikhani, production manager of the National Iranian Oil Company (NIOC), told the oil ministry’s SHANA website.
“Careful planning has been done to restore oil output to pre-sanctions levels in intervals of one week, one month and three months.”
In 2016, Tehran’s oil exports increased to 2 million barrels per day (bpd) and reached a peak of 2.8 million bpd.
Alikhani said Iran hoped to further raise its output “to more than 4 million bpd in the next step”.
“The average daily oil production of Iran after the implementation of the 2015 deal was 3.38 million bpd and we plan to return to that level if the sanctions are lifted,” said Alikhani.
Exporters, Buyers Brace for Normal Flows of Iranian LPG, Condensate
Iranian exporters aim to increase LPG exports to full capacity, if the Biden administration lifts sanctions that limited shipments from the country’s petrochemical plants and gas refineries, adding to healthy Middle East supply, which could drive up freight, industry sources familiar with the sector said.
Assuming the U.S. completely removes sanctions in second-half 2021, Iran can export 3.73 million mt during the period and at least 33 vessels will be needed for transportation, six more than currently, they said.
Removal of sanctions should the U.S. resume the Joint Comprehensive Plan of Action, or JCPOA, could also allow Iran to export condensates, an ultra-light crude that yields better product margins, and put pressure on Asia’s naphtha market.
South Pars condensate is expected to be competitively priced, allowing petrochemical makers to obtain cheaper feedstock naphtha from cracking this condensate.
“The market is worried the lifting of Iran sanctions would weigh on the naphtha market because condensate will be cheaper, so the Korean splitters will buy more condensate again instead of heavy full range naphtha,” a petrochemical producer said.
Iran had previously exported condensates to South Korean end-users, where splitters switch between using condensate and various naphtha grades, depending on economics. If Iranian supply were to return to the market, it would impact other types of naphtha, sources said.
“Last time, Iran used to export a lot of condensates for splitters like Hyundai, Hanwha, and others in Korea, and if this were to resume, then demand for heavy paraffinic naphtha will definitely go down,” the source added.
Restored Iranian LPG exports would add to abundant Middle East supply this year, with major producers regularly accepting lifters’ monthly term nominations without cuts or delays, while Kuwait and Qatar consistently sell spot cargoes. Whenever the U.S. arbitrage window opens, ample supply in Asia would render LPG cheaper than naphtha, making propane and butane a favored cracker feedstock.
LPG from petrochemical plants are produced by Bandar Imam Petrochemical Co. in Khuzestan province, which produces 1 million mt/year of LPG, Petrochemical Commercial Co. in Assaluyeh, which produces 1.5 million mt/year and Kharg Petrochemical CO, which produces 200,000 mt/year. Gas refineries export a total of about 3 million mt/year and are mainly located in South Pars and Assaluyeh.