Iran admits oil output hit by sanctions

Deputy Oil Minister Qalebani says significant drop in crude production due to lack of investment; NYT says collapse of talks with Polish company also hurt Iran's oil industry

Ynet, Reuters|Published: 12.20.11 , 13:01

Iran in a rare admission on Monday said its crude production has dropped due to lack of investment in its oil fields, as it faces the West's toughest ever sanctions over its nuclear program.

"Compared to last year there was an insignificant drop in our crude production due to lack of investment in developing oil fields," Deputy Oil Minister Ahmad Qalebani was quoted as saying by the student ISNA news agency.

Qalebani did not provide a figure for the fall in output.

According to the New York Times, the crude production has dropped also due to the collapse of four-year talks on a deal with Polskie Gornictwo Naftowe i Gazownictwo, a leading developer and distributor of natural gas, involved the Lavan natural gas field in the Persian Gulf, one of Iran’s largest deposits.

NYT reported that it was unclear exactly why the negotiations failed, but the withdrawal of the Polish company "clearly reflected the new pressures on foreign companies not to engage in commitments with Iran."

Most foreign oil companies are avoiding Iran's energy sector because of the western sanctions.

NYT said Tehran also suffered an embarrassment after prematurely announcing that a Russian oil company had committed $1 billion to help revive a dormant oil field in Iran’s southwest region. Hours later, the Russian company, Tatneft, denied that a deal had been signed.

Iran, the world's fifth-largest crude exporter, currently produces 3.5 million bpd, but hopes to boost its output to 5.1 million bpd by 2015.

Concerns over the OPEC producer's nuclear program have increased since a group of hard-line students stormed the British embassy in Tehran. Britain closed its embassy and expelled all Iranian diplomats from London.

Several other countries recalled their envoys, including France, Germany, Italy, Spain and the Netherlands.

The European Union is considering a ban - already in place in the United States - on imports of Iranian oil, although diplomats and traders say awareness is growing in the EU that a ban could potentially damage the bloc's economy without doing much to undercut Iran's oil revenues.

Iran has warned any move to block its oil exports would more than double crude prices.

Earlier Monday an Iranian newspaper reported that no less than 10 sub-committees were seeking ways to neutralize the effect of the sanctions imposed by western nations on the country.