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Iraq oil output boost to affect regional balance: Iran's Zanganeh

Iran, another 'Axis of Evil' country is considering switching to euro dollars.

http://www.investorshub.com/boards/read_msg.asp?message_id=993009

Iran is also trying to get as close to Europe as possible.


London (Platts)--12May2003

US plans to expand Iraqi crude output capacity will have negative repercussions for Iran and regional balance in the Gulf, Iranian Oil Minister Bijan Zanganeh said Monday. He also stressed the importance of rapidly boosting Iran's own production capacity, especially in oil fields bordering Iraq. Zanganeh, quoted by official Islamic Republic News Agency, told a meeting of Friday prayers leaders from nine provinces it appeared Washington did not want OPEC kingpin Saudi Arabia to retain its status as the leading player on world oil markets and was trying to raise Iraqi oil production from 2.5-mil b/d before the war to 6.5-mil b/d. "It seems that the United States wants to boost Iraqi production from 2.5-mil b/d to 6.5-mil b/d to stop Saudi Arabia from having the final say in world oil policy," Zanganeh said, quoted by AFP. Rising Iraqi production would lead to a "considerable difference" between Iranian and Iraqi oil revenues, affecting not only the balance of power between Tehran and Baghdad but also the regional balance, he said.

"We share our most important oil fields with Iraq, and the US will boost production in these fields, even if its intention is not to bother us, because it is profitable," Zanganeh said, adding that Iran should aim for a rapid boost in the capacity of these border fields. "Considering the current problems between the US and Europe, it is a good occasion for us to benefit from European investment," he added. An industry source close to Iran said Zanganeh's remarks were almost certainly aimed at cajoling the country's conservative establishment into supporting the reformist government's attempts to boost capacity through foreign investment under the so-called buyback model, whereby foreign companies are remunerated for their investment through deemed project revenues. Iran's conservative politicians have questioned the terms of the buyback deals, and senior Iranian oil officials have said that allegations of misconduct involving the oil ministry have delayed billions of dollars worth of oil and gas development deals with foreign companies.

"Opponents of buybacks and foreign investment in the oil sector don't oppose on ideological grounds but on political grounds; they don't want the reformist government to benefit from increased investment in the oil and gas sector," said the industry source close to Iran. Dresdner Kleinwort Wasserstein analyst Mehdi Varzi agreed that Zanganeh was trying to underline the importance of boosting production through the buyback deals. He said there was "no doubt that Iran is worried about rising Iraqi production," whichever regime was in power in Baghdad. "The buyback system has been very disappointing. Iran's production capacity, seven years after the first buyback deal was signed, is still stuck between 3.5- and 4-mil b/d," Varzi said. At the same time, Varzi suggested, Zanganeh was also sending a message to Saudi Arabia. "He is telling the Saudis 'you need us'," he said. Last month, Zanganeh said Iran wanted to boost its output capacity from a current 4-mil b/d to 5-mil b/d in two years' time.