To reduce the economy's dependence on oil revenues, the oil money must be utilized to expand non-oil sectors such as petrochemicals, oil minister Bijan Namdar Zanganeh was quoted by IRNA as saying.
Although share of oil revenues in the budget is being gradually reduced, its impact on foreign trade balance has remained intact. "A non-oil economy should be developed through oil," said the minister.
Oversupply is mainly to blame for falling crude prices although political factors have also had an effect, Zanganeh stated.
"Surplus oil supply in the market has been the main cause of price decline in recent months," he said in a televised interview.
"There is no doubt about political factors having an effect to sustain the situation; but to what extent, one cannot say for sure," he said.
Zanganeh said there were 2 million barrels per day of excess oil supply in the market, and "this is expected to endure for the first six months of 2015."
Although the last OPEC decision on keeping its output steady has not at all benefited Iran, "we want to keep our relations with the organization at the same level as before."
Oil production decreased by 1.5 million barrels per day in recent years, Zanganeh said. "After a long time, we now have surplus oil."
Benchmark Brent crude futures were up Friday yet remain roughly 50 percent below their levels last June amid rising global inventories and steady OPEC supply.
South Pars Progress
In the face of international sanctions imposed on the energy sector, more than four phases of South Pars gas field went into operation in the current Iranian calendar year (end March 21), helping stabilize gas supplies especially in cold seasons, the oil minister added.
More than two thirds of oil, gas, and drilling equipments are manufactured domestically, as sanctions have prevented Iran from acquiring foreign machinery and equipment.
An additional 100 million cubic meters of gas will be produced next year, the minister said. It is expected that by 2016 all South Pars phases will go into operation, which might help Iran outstrip Qatar regarding gas production from the joint field. Regarding supply of oil at the energy bourse, Zanganeh said the ministry is determined to offer oil and petroleum products at bourse.
"Fortunately, the parliament (Majlis) and the government have supported the ministry in this regard, and have expressed readiness to cooperate," he said, adding that $100 million worth of shares of petroleum products is to be offered in the near future.
With the eight gas condensate refineries each with a capacity of 60,000 barrels due for commissioning, it is expected that 480,000 barrels of gas condensate will be converted into other products over next three years, in which case the country will have more than one million barrels of processed gas condensates. Thus, no gas condensate will be available for exports, and only the processed products shall be exported.
Less than 70 million liters of gasoline is consumed per day, of which 5 million is imported. Around 20 million liters of the supplied gasoline conforms to Euro-4 Standards.
Long-Delayed Pipeline
On Iran-Pakistan (IP) gas pipeline, Zanganeh said Pakistan lacks financial resources to lay the pipeline on its side, and will start imports from Iran once sanctions are lifted and financial problems are solved.
The pipe-laying project within Iran's border was carried out at a cost of $2.5 billion; however, the 780 km pipeline due in Pakistan has not been laid due to funding difficulties faced by Islamabad.
Pakistanis have asked Iran to waive the$3 million penalty per day, which was due on Pakistan from 1st January 2015 for delays on construction of the pipeline in time. "If we are to agree with their request they should also revise some terms of the contract to the benefit of Iran," Zanganeh asserted.
The US and its allies imposed tough sanctions on Iran to curb the country's nuclear program which they claim is geared to military use. Iran insists its program is peaceful. Iran and the P5+1 group ( five permanent members of the UN Security Council, namely United States, Russia, China, United Kingdom, and France, plus Germany) have been holding marathon talks over the past year to thrash out a mutually acceptable comprehensive deal.
Foreign Interest in Energy Projects
Zanganeh said foreign companies are waiting to enter Iran’s energy market once sanctions are lifted. The minister added that numerous negotiations have been held with international firms over the past 18 months. “These companies are waiting for the sanctions against Iran to be lifted so that they can swiftly sign deals."
“US and its allies, however, are trying their best to impede our work,” he said, adding that American officials have even announced opposition to a conference in London aimed at presenting Iran’s new oil contract model.
The conference was due to be held this month but it was delayed until later in the year without explanation. Zangeneh says Iran has put forth its energy projects up for foreign investment both in the upstream and downstream sectors. European energy giants, including Italy’s Eni, Royal Dutch Shell and Austria’s OMV, have announced their readiness to reenter Iran's energy market.
