Iran’s spare oil production capacity is quite limited, Kamran Dadkhah, an associate professor in the Department of Economics at the US Northeastern University, expert on Iran believes.
“Prior to the Islamic revolution [in 1978-79] Iran produced 6 million barrels per day. On that basis Iran has close to two million barrels of unused capacity. But this is misleading,” Dadkhah told Trend by email on June 14.
The expert noted that over the past 38 years Iran’s oil fields have been deprived of required investment and maintenance.
“Therefore, Iran needs to attract substantial foreign investment and modern technology to be able to use its spare capacity,” he said.
Dadkhah expects Iran will continue its efforts to increase its oil production and exports, but this would not be an easy task. The expert noted that one problem in the way of attracting foreign investment was the so called buyback contracts, but the Iranian oil ministry has already abandoned those contracts in favor of joint investment.
What Iran needs to do now is to settle its problems with the United States and Saudi Arabia, he said. Dadkhah noted that many companies and investors are wary that investment in Iran may involve sanctioned individuals and institutions due to their connections to terrorists or money laundering groups. On the other hand, many oil companies do not want to antagonize another big oil producer, he said.
“If Iran could settle these issues and provide a safe environment for investment, many oil companies would rush to invest in Iran,” Dadkhah said.
The expert believes Iran oil reserves both inland and in the Persian Gulf are quite attractive to oil companies, but Iran should settle for known companies with access to the latest technology such as Royal Dutch Shell and Exxon Mobil. Dadkhah does not expect that current low oil prices will hinder foreign companies from investing in Iranian oil fields.
“Oil production from conventional fields is still quite profitable. Moreover, it is expected that oil prices will stabilize and then increase in the future. Therefore, if other conditions are met, there will be investment in Iranian oil fields,” he said.
Earlier, Iran announced that it had achieved the pre-sanctions level of oil production. According to OPEC, oil production in Iran in May grew by more than 89,000 barrels per day – up to 3.562 million barrels per day. According to BP, Iran ranked fourth in the world in terms of the proven oil reserves, which amounted to 21.7 billion tons at the beginning of 2016.