Iran Not to Undersell Oil

Iran Not to Undersell Oil Iran Not to Undersell Oil

Lifting the 40-year ban on the US crude oil export will not inflict any harm on Iran’s oil market, deputy oil minister and head of the National Iranian Oil Company said on Thursday.

“Iran is seeking neither to undersell crude nor to offer high discounts to its customers,” Rokneddin Javadi was quoted as saying by Mehr News Agency.

Underscoring the fact that oil production costs are low in Iran, the official added, “The emergence of the US as a new exporter in international gas condensates and oil market will mainly lead to the bankruptcy of companies whose production costs are high, as they will be forced to either curb production or restrict their supply.”

Referring to the vulnerability of oil-rich regions to low oil price, including the North Sea, Mexico, Africa and Asia, Javadi noted that Iran is located in the least vulnerable area and it will be affected less than the other regions.

According to Rystad Energy, an independent oil and gas consulting services in Norway, the final cost of producing each barrel of oil in Iran stands at $12.60 compared to $8.50 and $41 in Kuwait and Canada respectively.  

Ruling out foreign media speculations on NIOC’s willingness to give substantial discounts to its traditional customers such as India in the post-sanctions era, he said Iran has no intention of taking such desperate measures unless prices undergo dramatic changes.

“We should wait and scrutinize market fluctuations. It is too early to go for extreme decisions. Yet if the time is ripe, we will take the most appropriate decision,” he said.

 Discount Prices for India

Nonetheless, according to Economic Times report, Iran has agreed to consider Indian demands for oil price discounts and other buying incentives, sources said, as it works to rebuild market share in a world awash with crude.

Seyyed Mohsen Qamsari, NIOC’s director for international affairs, met Indian refiners last week, the sources told Reuters, including firms that halted imports from Tehran because of the sanctions.

Rather than quoting its own terms and prices, people involved in the negotiations said the Iranian delegation tried to persuade refiners for proposals that would make their supplies more competitive than those of rivals.

Qamsari seemed to be willing to consider better sales terms, apart from offering new grades of crude to boost market share, said four Indian refinery sources with direct knowledge of the talks.

According to the Wall Street Journal, a Texas energy company will load the first freely traded cargo of US crude oil to be shipped overseas.

Enterprise Products Partners LP said on Wednesday that during the first week of January it will load 600,000 barrels of light, sweet crude pumped in South Texas into a tanker at its oil terminal on the Houston Ship Channel. The announcement comes less than a week after Congress passed legislation that lifts the 40-year ban on exporting US oil.

Vitol Group, a Dutch oil-trading titan, is buying the crude, according to Enterprise. The oil will head to a Vitol subsidiary’s refinery in Cressier, Switzerland, which supplies diesel and other fuels to Northern Europe, according to a person familiar with the matter.

“We are excited to announce our first contract to export US crude oil, which to our knowledge may be the first export cargo of US crude oil from the Gulf Coast in almost 40 years,” said Jim Teague, chief operating officer of Enterprise’s general partner.

American oil giants have welcomed the US Congress decision to lift export bans on the US crude. Nevertheless, given the current drastic slide in oil prices, they will face tangible challenges, for which it is very probable that they store their oil instead of exporting it at low prices.

The US daily consumption amounts to 20 million barrels, of which 9.5 million barrels are produced domestically. Needless to say, such a country will not be able to emerge as a key player among major oil exporters.