28 Mar 2024
Thursday 27 August 2015 - 13:06
Story Code : 177851

On exigency of boosting oil production

Tehran, Aug 27, IRNA - The Oil Ministry announced that crude exports have increased more than 15 percent in the past four months.

Also, the ministry has boosted self-belief among oil equipment producers to further meet domestic demands, it is said in an article by Kamran Naderi appeared on the Thursday edition of 'Iran Daily'.

It has truly been a forerunner in adopting and enacting 'Resilience Economy' policies.

Under the toughest of sanctions, domestic oil, gas and petrochemical sectors have made substantial progress. Currently, the removal of the embargoes by some states has boosted hope for the speedy development of the oil industry and a rise in the ministry's revenues.

Nevertheless, the downward trend of oil prices in international markets has aroused concerns about the future of the domestic industry, sustainability of national revenues and the sufficiency of the government's budget for the year to mid-March 2017.

Oil prices plummeted to about $40 per barrel in the past few days.

Iran's move to increase crude output and exports under present circumstance will further bring the prices down. This is while, the Oil Ministry has announced plans to attain its earlier production and export quota in the international market and regain its former status as a major oil producer.

This calls for patience. Any unwise decision or hasty move will upset the balance in the market.

Some states, particularly crude importers, prefer the continuation of the declining trend; whereas, Iran, which sits on huge oil reserves, is required to exercise great caution to avoid further fall in prices.

The question is how the country can produce 4 million barrels per day its quota prior to the tightening of the sanctions without greatly affecting market prices.

A large number of countries, especially the importers of fossil fuels, have decided to gradually replace them with renewable energies. A reason for this is the current tension and insecurity in the Middle East.

A major portion of the world's hydrocarbon resources are located in this region and therefore any instability is a cause of concern for customers.

Another reason pertains to environmental issues. Fossil fuels create a great deal of pollution.

Prior to boosting oil output or even placing it on the agenda, the government is required to clearly predict the future of the global market.

In case forecasts suggest that crude will retain its popularity in the future, production growth will be in the interest of the national economy; whereas, if the government [based on thorough studies of market developments and future policies of major customers] arrive at a consensus that the number of oil importers is dwindling, an increase in output would not seem logical.

The continuation of the current decreasing trend in crude prices, adds to the difficulties of the Oil Ministry to make or attract investments.

The government is required to direct investments towards sectors and projects which are conducive to higher productivity.

For instance, instead of raising oil output, the government can inject revenues and foreign funds into the domestic production cycle.

It can also build more plants to generate renewable energies, promote their use and consequently become an exporter.

Some experts maintain that the drop in oil prices was aimed at aggravating Iran's economic crisis. Therefore, the government has to pay full attention to the profitability of the projects, in which it opts to invest.

In addition, efforts are required to reduce reliance on oil revenues. Any imprudent move to increase oil output, and in turn, exports will further entail lower prices.

By IRNA
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