Iran’s govt may slash oil sales outlook, store more 8.1 million barrel additional storage capacity eyed next year

DUBAI, Nov 26, (RTRS): Iran’s state budget for the next fiscal year may assume exports of just 1 million barrels of oil a day, an Iranian budget planning commission member told the semi-official Fars news agency on Monday, about half volumes shipped in 2011. “Apparently, the government wants to decrease the 1392 (the next Iranian year starting on March 21) state budget’s reliance on oil exports to one million barrels a day,” parliamentarian Gholamreza Mesbahi Moqaddam was quoted as saying by Fars. The International Energy Agency (IEA) estimates that Iranian oil exports dipped below 1 million barrels per day (bpd) over summer as US and European Union sanctions on Tehran tightened. According to official Iranian government data available through the Joint Oil Data Initiative (JODI), Iran exported an average of just over 2 million bpd in 2011.

Maintain
Iranian officials usually maintain that oil exports have not been significantly affected by western sanctions aimed at stopping the country’s disputed nuclear activities and say that the sanctions are an opportunity for the country to wean itself off heavy dependence on oil. The US government has focused on blocking Iran’s oil exports because it estimates that crude sales provide about half of Iranian government revenues. The IEA estimates that Iranian oil exports bounced to 1.3 million bpd in October. But if the country’s budget planners are now expecting to sell only 1 million bpd on average next year it implies Iran expects to make around $110 million less each day from oil sales than before sanctions tightened in early 2012.

With exports down sharply and fewer oil tankers available to store the excess, Iran’s Press TV reported on Sunday that Iran plans to build millions of barrels of additional storage facilities in the Gulf over the next few months. “By the middle of the next (Persian calendar) year (beginning March 20, 2013), nearly 8.1 million barrels will be added to the crude oil storage capacity of Iran,” Press TV reported the managing director of the Iranian Offshore Oil Company (IOOC), Mahmoud Zirakchian-Zadeh, as saying. Western governments led by the United States have increased pressure on the Islamic Republic this year in an attempt to curb its nuclear programme that they say is includes atomic weapons but Tehran says is peaceful.

In early 2012, Iran used some of its fleet of oil tankers to store crude it could not sell due to western pressure on its customers to reduce their intake. But the number of ships anchored off its main export terminal in the Gulf, Kharg Island, has fallen sharply over the last few months, ship tracking data shows, as Iran’s state tanker company has had to use more of its own vessels to deliver crude to buyers unable to obtain shipping insurance. The IEA estimates that Iranian crude oil held in floating storage nearly halved to 13 million barrels at the end of October from as high as 25-30 million in April.

Although short-term reductions in production could give Iran’s old oil wells welcome rest, a prolonged reduction in output could cause long-term production problems. Iran has over 20 million barrels of onshore oil storage capacity at Kharg Island and another 5 million at Lavan Island but these facilities are believed to have been filled as Iran’s exports have slid over the past year. The additional storage to be built over the next year near the Bahregan oil field in the northern Gulf would be enough to store less than three day’s of the IEA’s estimate of Iranian output of around 2.7 million bpd in October.

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