Iran's NIOC Should Expand Options for Selling Oil
EghtesadOnline: Exporting crude under conditions when new US sanctions are intimidating traditional customers is a difficult undertaking and the National Iranian Oil Company should explore all alternatives to export oil, a lawmaker said.
"Offering discount and longer than normal deadlines to buyers to pay their bills are inevitable. Such measures can help prevent financial crises," Hedayatollah Khademi said, ICANA reported.
The country is heavily dependent on oil export revenues as no effective measures have been adopted yet to cut this overreliance on oil in the past four decades. This is why sanctions have had a profound effect, he said.
"NIOC has no option but to sell oil and petrochemicals in the "gray market." Giving discounts has seemingly attracted buyers and can help ensure crude exports in the long term [with low profit margin]," Financial Tribune quoted him as saying.
The company sold 2.6 million barrels of oil per day following the implementation of the nuclear deal in Jan. 2016 known as the Joint Comprehensive Plan of Action.
According to tanker data and industry sources, Iranian crude exports fell sharply in May to around 400,000 barrels per day, plummeting by 84% compared to the corresponding period in 2018.
The US unilaterally withdrew from the historic deal and imposed new sanctions on Iran last year.
Referring to other options, the MP said offering crude oil on the stock exchange could help albeit in the long-term. Tehran launched a crude futures market last year to let private companies participate in the state-dominated sector, but it needs more time to produce the desired results.
"Developing downstream industries to complete the value chain in the petroleum sector is crucial for easing the pressure of sanctions," he said, adding that it has significantly higher value added and creates more jobs compared to the upstream sector, i.e. oil and gas exploration and production.
The lawmaker said selling value-added petrochemicals is not as difficult as exporting oil because the former “is a growth industry” that has huge global demand.
Downstream industry includes oil refineries, petrochemical plants, petroleum product distributors, retail outlets and natural gas distribution companies.
Khademi was of the opinion that strengthening ties with traditional customers (and the global community) is key to convincing them to buy oil despite US sanctions.