VIENNA – Iran indirectly challenged OPEC kingpin Saudi Arabia on Wednesday, announcing that it plans to pump as much oil as it can once sanctions on its crude exports are lifted, even if its extra output drives prices into the basement.
The comments by Iranian oil minister Bijan Namdar Zanganeh reflected Tehran’s determination to regain its global role as an oil power if it is freed of the sanctions under any nuclear deal with six world powers meant to ensure that its atomic activities cannot be used to make weapons.
It also raised the prospect of a production war inside the cartel, which is keen to project an image of unity among its 12 members. If Iran does ramp up its output, other OPEC members would have to reduce theirs to keep prices from dropping too much and hurting them all.
That potential problem was not on the top of the agenda at Wednesday’s meeting, where the oil ministers agreed to extend present output targets of 30 million barrels a day.
But the Organization of the Petroleum Exporting Countries may have to focus on the prospect of overproduction as early as their next meeting on June 11.
Iran’s agreement to limit its nuclear program is still only a preliminary one. Sanctions on its oil exports are likely to stay in place until a final deal is reached, which – if it happens – is unlikely before mid-2014.
If and when the sanctions are lifted, Iran says it wants to ramp up production to pre-sanctions levels of 4 million barrels a day.
Iraq also wants to reach that target within a year, while Libya hopes to increase output to 2 million barrels a day once unrest ebbs. In all, that would add close to 4 million barrels to total daily production, meaning some members would likely have to cut back.
OPEC has had little success in the past at asking member countries to respect individual targets. But OPEC Secretary-General Abdullah Al-Badry sought to downplay looming problems from any surplus production, saying his organization would deal with it if and when that happened.
Zanganeh said his country was determined to regain its share “under all circumstances.”
“We will produce 4 million even if the price drops to $20,” he said. Benchmark Brent crude on international markets now sells for nearly six times as much, and a drop to anywhere near $20 would spark a crisis among oil exporters by leaving production costs far outstripping sales revenue.
The Iranian comments posed a potential challenge for Saudi Arabia, which accounts for about a third of OPEC output and is Tehran’s greatest regional rival.
Saudi oil minister Ali Naimi sought to ease concerns, telling reporters he did not see a price war on the horizon.