Iran would be among few countries that have benefited as significantly from the oil market’s 2016 recovery.

As prices rallied and won approval from OPEC last month to pump even more while other members cut, the Persian Gulf producer has doubled exports since sanctions on its economy were eased in January. Attracting foreign investment to the energy industry would be the key to continued growth.

“Iran is definitely better off than they started the year,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “Further expansion plans for production have reached a plateau. They need foreign investment.”

Iran, with a population about three times larger than Saudi Arabia’s and an economy less dependent on crude, accelerated its growth even as most Gulf nations struggled with lower oil revenue after prices plunged to less than half of their 2014 levels.

For an industry deprived for years of technology and funds, Iran is trying — so far with limited success — to attract more than $100 billion in foreign investment to keep up the momentum.

Iran has boosted production this year by 870,000 barrels a day. Compared with $110 million a day last December, when Brent averaged $39.15, and generating the equivalent of $172 million daily based on the average price for Brent crude last month of $46.98 a barrel, it pumped 3.67 million barrels a day in November. According to data compiled by Bloomberg, Iran has risen to become the third-largest producer in OPEC. The country managed to avoid output cuts after OPEC agreed in November to a collective reduction for six months starting Jan. 1, the country goes into 2017 having strengthened its position. “That is a big success,” Fritsch said.

“We need to reach pre-sanctions production levels,” Amir Hossein Zamaninia, deputy oil minister for international affairs, said in October at a conference in Tehran. He said that before restrictions were imposed on its economy, the country pumped 4.085 million barrels a day.

The International Energy Agency said in a report on Dec. 13 that sales last month reached about 2.4 million barrels a day and Iran has been exporting more crude since April than it did under sanctions.

“There is a potential need for more crude by the end of next year,’’ Jaafar Altaie, managing director of Abu Dhabi-based consultant Manaar Group, said by phone from Abu Dhabi. “Iran will have to fight for those sales.’’

Fritsch and Altaie said that Iran lacks the expertise needed to add the roughly one million barrels of daily production capacity it’s targeting by the end of the decade even though it was OPEC’s second-biggest producer behind Saudi Arabia until sanctions were intensified in 2012.

“Oil production west of Karoun must reach one million barrels per day,” President Hassan Rouhani said last month, referring to three fields west of the Karoun River near Iran’s border with Iraq. “This is a realistic goal, and we need investment and technology.”

Since Oil Minister Bijan Namdar Zanganeh outlined more than 50 potential projects at a Tehran conference in November of last year, the country has yet to sign any concrete deals to boost crude production even while the country has reached several preliminary agreements with international companies.

In November Iran clinched a $4.8 billion gas development project with energy giants Total SA and China National Petroleum Corp and it also has the world’s biggest natural gas reserves. Companies such as Total, Royal Dutch Shell Plc and Russia’s Lukoil PJSC and Gazprom Neft PJSC  are planned ot be brought back to its oil fields by the country next year.

“There are positive signs with these recent deals,’’ Altaie said. “The big question is whether Iran can translate that into final contracts.”

(Adapted from Bloomberg)

Categories: Economy & Finance, Strategy