Iran Parliament Approves 2m Barrels Oil Offer via IRENEX

EghtesadOnline: Lawmakers on Sunday approved an amendment to next year's (March 2019-20) budget bill obliging the Oil Ministry to offer on a monthly basis 2 million barrels of light crude on the Iran Energy Exchange.

News ID: ۷۴۶۷۲۴

18 February 2019

According to the parliamentary news website ICANA, the ministry is also obliged to offer 2 million barrels of heavy crude oil plus two million barrels of natural gas condensates on IRENEX every month.

Payment for the oil can be made in rials or in foreign exchange and offers must be within the terms announced by the Security and Exchange Organization.

The ministry is required to present a performance report to members of the Majlis Energy Commission every three months, Financial Tribune reported.

In another amendment to the proposed budget, the MPs allowed the government to export energy carriers via border markets at prices quoted in neighboring countries or prices set by IRENEX. Earnings must be deposited with the treasury after deducting the share of relevant bodies as outlined by law.

Several attempts have been made to sell crude on the Tehran Stock Market and involve the private sector and international stakeholders in the heavily state-controlled oil sector.

The National Iranian Oil Company so far has held four rounds of the crude oil offer on IRENEX and the fifth is slated for February 18.

In the first round in October, one million barrels were offered but only 280,000 barrels were sold at $74.85 a barrel. In the second round in November sales increased to 700,000 barrels at $64.97 per barrel. The third and fourth rounds ended without any deals despite the NIOC’s untiring attempts to ease the sale conditions in the interest of buyers.

The initiative is in line with the tenets of ‘Resistance Economy’ that advocates variety in crude export methods and tapping private sector potential in oil exports.

1,420 Trillion Rials in Revenue

The legislature forecast that crude oil export revenue for the next fiscal will be around 1,420 trillion rials.

According to ICANA, MPs proposal for increasing or reducing the oil revenue ceiling was rejected by the chamber.

Mohammad Baqer Nobakht, head of Plan and Budget Organization- the body in charge of drafting the annual budget- said Saturday the forecast for oil sales in the current fiscal (2018-19) on average is 2.4 million barrels a day, while in the early months of the year oil exports hit 2.8 million barrels.

“Despite the oppressive US sanctions, we will strive to boost exports in the coming fiscal year. However, we prefer to err on the side of caution and set the ceiling at 1.5 million barrels per day,” he was quoted as saying by ICANA.

NDFI Share

Lawmakers endorsed the government's proposal in the budget to cut the share of the National Development Fund of Iran to 20% of the total oil export revenues, down 12% compared to the current fiscal.

This is while as per the Sixth Five-Year Economic Development Plan, share of the sovereign wealth fund should be 34% of total oil export revenues in the next fiscal.

The gap in the share was okayed by parliament and the legal share of the NDFI will be considered as government debt to the fund.

In response to a lawmaker’s objection to cuts in the share of the sovereign wealth fund, Majlis Speaker Ali Larijani said the decision was made based on a “decree” issued by the Leader Ayatollah Sayyed Ali Khamenei, recalling that he charts NDFI policy.

“The Leader said in writing that in the present economic conditions, the fund should get 20% of the oil revenue next year,” he said.

This while the Majlis Reach Center, the parliamentary research arm, warned earlier that even realizing the reduced amount (20%) of the sovereign -wealth fund earning is far-fetched. It termed the budget planners’ prediction about oil revenues an “overestimation”   unlikely to come true.

Taking into account the US sanctions and hurdles to oil exports, the Majlis think tank says crude exports in the best case scenario would be 1 million barrels a day in the coming that starts in March.

Bartering Oil With $3.2b Debt

Lawmakers allowed the government to reimburse its definite debts to legal and natural entities as well as cooperatives and the private sector to the tune of 400 trillion rials ($3.2 billion) by bartering oil after deducting the NDFI share.

Law only covers debts incurred within regulations by the end of the current fiscal on March 20. Oil prices are to be determined by IRENEX or regional price norms.

Lawmakers passed another amendment to Note 1 of the budget bill, according to which the price of petrochemical fuels is doubled in the next fiscal.

Accordingly, the Oil Ministry is allowed to raise the price of petrochemical fuels from 1,320 rials to 2,600 rials per cubic meter.

Caption: Lawmakers endorsed the government's proposal in the budget to cut the share of the National Development Fund of Iran to 20% of the total oil export revenues.