Iran boosts oil output despite Western sanctions

Iran's oil production is on the rise despite Western efforts to curtail it. More Iran oil has gotten the attention of the Organization of Petroleum Exporting Countries, which is charting a course for the future amid new sources of oil.

Vahid Salemi/AP/File
An Iranian oil technician checks the oil separator facilities in Azadegan oil field, near Ahvaz, Iran.

Iranian Oil Minister Bijan Zanganeh said oil production from the Islamic republic could increase even with harsh economic sanctions in place. In late December, Tehran said it would pump as much oil as it could if sanctions are lifted. Now, it seems, OPEC is taking notice.

Zanganeh said he was ready to tap into all available oil resources despite Western economic sanctions targeting his country's energy sector.

"We are hoping to see sanctions shrink, however we assume the harshest circumstances and draw up our roadmap assuming that sanctions will not be altered," he said. (Related Article: Russia-Iran Oil Swap Deal Gains Momentum)

Iran produced 2.79 million barrels of oil in March, according to the latest monthly market report from the Organization of Petroleum Exporting Countries. That's 3.5 percent higher than the average reported for 2013 and Zanganeh said he thinks production could reach as high as 4.2 million bpd during the current Iranian year, which began in March. 

Iran holds about 9 percent of the world's total proven oil reserves and more than 12 percent of OPEC's, placing it behind only members Venezuela and Saudi Arabia. Under a five-year development plan launched in 2010, Iran aims to produce 5 million bpd.

That trend got the attention of OPEC Secretary-General Abdalla El-Badri, who's trying to chart a future path for a cartel squeezed by production from North America.  U.S. crude oil exports are currently restricted by laws enacted in the 1970s, and with fossil fuels still accounting for more than 80 percent of the energy mix, supplies will have to come from somewhere, he said.

Zanganeh started hinting at the production increase in December, one month after the Iranian government secured some sanctions relief from an interim nuclear deal. While this week's nuclear talks were described as "substantive," negotiators said they'd need to "bridge the gaps" at their May meeting in Vienna. Despite the progress, the U.S. government has said Iran's energy sector isn't open for business.

Last year, the U.S. Energy Information Administration said crude oil exports have declined steadily since the 2.5 million bpd mark set in 2011. Zangeneh, however, said Iran doesn't need "America's permission" to increase the amount of oil it exports. (Related Article: Pipeline to Turkey Intensifies Dispute Over Iraqi Oil)

Oil exports from Iran are restricted to 1 million bpd under the terms of the interim nuclear deal, though shipping data show Iran has stayed above that level for about five months. El-Badri said the world will still run on oil, and with Iran already showing its mettle, Tehran may continue to gain market traction despite sanctions pressure.

OPEC will continue playing a dominant role in the global energy market despite oil gains in North America, though its internal dynamics may shift if new supplies come on stream. The cartel, El-Badrisaid, may have to make room for Iran.

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