Behrooz Baikalizadeh, Iran’s national representative to OPEC

The most important challenge that Iran has faced in terms of reviving oil production is the transfer of the required technology to enhance recovery in oilfields.

Behrooz BAIKALIZADEH Iran OPEC

Iran’s OPEC comeback

November 28, 2017

Behrooz Baikalizadeh, Iran’s national representative to OPEC, talks to TOGY about 2016’s oil output cap agreement and continuing commitments to balance the market, as well as Iran’s oil potential in this context. Iran is among the five founding members of OPEC, formed in 1960 to co-ordinate policy among oil producing states. Today, the group has 14 members.

• On Iran’s export comeback: “In fact, Iran not only managed to increase its crude oil production level in the post-JCPOA period, but also gradually sold its stored crude oil thanks to the daily efforts and extensive negotiations by NIOC’s International Affairs Directorate’s hard-working staff. Undoubtedly, Iran will firmly keep doing this in the future, and aims at supplying its customers’ needs in different corners of the world.”

• On Iran’s growth plans: “Taking into consideration the price hike forecast and consequently Iran’s improved oil revenues, as well as FDI in Iran’s oilfields, the forward pacing of the oil industry, especially in the upstream sector, is expected to further accelerate. The Islamic Republic of Iran’s Ministry of Petroleum has great plans with regards to developing and updating the downstream sector aimed at enhancing oil products’ production potential. Implementation of these plans would strengthen Iran’s potential for exporting oil products and Iran’s presence in the global oil market.”

Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Behrooz Baikalizadeh below.

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What has been OPEC’s focus over the past year?
Over the last year, all of OPEC’s organs and member countries have made significant efforts aimed at reaching an agreement between OPEC and non-OPEC countries to adjust oil production, and to implement and monitor conduct in order to improve oil prices.

How do you assess the oil output cap agreement signed in December 2016?
I would like to stress that the OPEC and non-OPEC joint agreement reached in December 2016 was the outcome of extensive lobbying work by OPEC member countries as a firm response to those who claimed OPEC was no longer effective. On the contrary, the agreement became a turning point in the history of OPEC activities as far as non-OPEC countries’ collaboration is concerned.
In fact, the collective will and the spirit of collaboration from all OPEC member countries ultimately led to consensus on oil supply management. Therefore, OPEC was able to convince 10 major non-OPEC countries including Russia to take part in the gradual rebalancing of the market, as well as strengthening oil prices.

 

Given the post-sanctions context, what have been the biggest challenges for Iran in its attempt to increase its production capacity under OPEC’s output caps?
The most important challenge that Iran has faced in terms of reviving oil production is the transfer of the required technology to enhance recovery in oilfields. Given the five-year period of the sanctions imposed on Iran, full exploitation of oilfields was not possible, as the revival of production required more intense efforts as well as high investment and planning.
Nonetheless, relying on the tactfulness of Iran’s minister of petroleum and our colleagues’ endeavours and efforts in various segments of the petroleum industry, Iran was able to overcome the aforementioned challenges in 3-4 months, and increase its oil production rapidly through local expertise.
The other challenge that our oil industry faced was the issue of marketing and regaining Iran’s traditional oil export markets. In this regard, and thanks to intense efforts, the National Iranian Oil Company (NIOC) rapidly managed to enhance its crude oil and oil products production rate, and attract its long-time customers again.

Taking into account the aforementioned capabilities, how do you assess Iran’s oil industry potential?
These developments are an indication of high-level management potential all across Iran’s petroleum industry, and also indicate that given the country’s reserves/production ratio, the oil and gas sector in Iran could play a prominent role in the world energy scene through attracting foreign investment.
Iran, in a certain way, contributed to the Vienna Agreement, to the OPEC and non-OPEC production adjustment within the framework of the “Declaration of Cooperation,” and to the plan for reducing and stabilising crude oil production. Taking all this into account, Iran could keep increasing its production trend since the beginning of 2017 towards reaching its pre-sanctions levels.

How do you evaluate Iran’s crude comeback in global markets since sanctions were lifted?
Immediately after the implementation of the Joint Comprehensive Plan of Action (JCPOA), the Islamic Republic of Iran was able to regain its market share in its traditional markets: Europe and Asia. While many oil analysts and experts believed that increasing production by 1 million bopd immediately after the removal of sanctions was impossible, Iran’s exports level did increase. More specifically, the Islamic Republic of Iran was able to increase its crude oil export rate to 2 million bopd within the following six months.
In fact, Iran not only managed to increase its crude oil production level in the post-JCPOA period, but also gradually sold its stored crude oil thanks to the daily efforts and extensive negotiations by NIOC’s International Affairs Directorate’s hard-working staff. Undoubtedly, Iran will firmly keep doing this in the future, and aims at supplying its customers’ needs in different corners of the world.

What is your role as the Iranian national representative to OPEC?
OPEC’s Economic Commission Board (ECB) is formed by national representatives of the member countries and is the technical and expert body of the organisation that deals with oil market developments.
The ECB meetings are usually held one week prior to the OPEC Conference, and national representatives along with the secretariat’s staff review and assess the latest market developments, as well as global oil prices, the world oil supply and demand status and economic conditions, providing in this way a short-term outlook on the oil market. Moreover, the ECB report is submitted to the conference for the ministers’ consideration.

Given the current oil industry trends worldwide, with the US increasing shale production while OPEC countries have extended cuts, what is your perspective on the future of oil prices in 2018?
All reports published since the beginning of 2017 indicate that countries participating in the OPEC and non-OPEC Declaration of Cooperation have had an effective contribution towards stabilising oil prices, as well as managing to decrease excess supply in the market.
North America producers account for a significant surplus in the supply market. Shale oil is a reality that can’t be ignored in the oil market, and it has affected the market developments and crude oil prices during the last three years.
Given the high level of conformity of the countries participating in the OPEC and non-OPEC Declaration of Cooperation to the commitment of decreasing production on the one hand, and to global oil demand growth in H1 2017 and the beginning of 2018 on the other, hopefully we will witness a gradual rebalancing of the oil market, as well as improved oil prices at fair and satisfactory levels favoured by both producers and consumers.

How will this affect Iran’s growth plans for the industry?
Taking into consideration the price hike forecast and consequently Iran’s improved oil revenues, as well as FDI in Iran’s oilfields, the forward pacing of the oil industry, especially in the upstream sector, is expected to further accelerate. The Islamic Republic of Iran’s Ministry of Petroleum has great plans with regards to developing and updating the downstream sector aimed at enhancing oil products’ production potential. Implementation of these plans would strengthen Iran’s potential for exporting oil products and Iran’s presence in the global oil market.

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