Q&A with Iran's oil minister after Opec meeting

After today's Opec meeting where ministers agreed members countries should strive to reduce the compliance rate to 100pc of the headline 1.2mn b/d agreed in December 2016, Iran's oil minister Bijan Namdar Zanganeh spoke with Argus.

Yesterday, the sense was that you would not be prepared to accept any agreement, yet, today, we have consensus among all Opec members. What changed?

That which was important for me, was that Opec did not give the wrong signal to the market, and more importantly, the US. Yesterday they came with a proposal to increase oil production by 1mn b/d pro-rata between the 24 members in the declaration of cooperation. We were against this, because this was a deceptive number. And it would not work because, if they gave Venezuela a share to raise production — it cannot even produce at normal levels. Or Mexico, it cannot produce at normal levels.

At that point, the discussion centred on seeing at most 600,000 b/d more on the market. Our logic was that in Opec, what we had approved was that we produce 31mn b/d or so, in addition to Nigeria and 12 members. We never said that participating countries should comply more than 100pc. What we said and agreed on was to have, at most, 100pc compliance. In the entire history of Opec, we have never had 100pc compliance.

[Today we agreed] each country which has produced less [than its allocation] can produce more. Those which cannot, will not. This means that Saudi Arabia can increase its production by less than 100,000 b/d, Qatar can produce an additional 70,000 b/d, and others which produced less [than their allocations], can now increase production. This was our decision. We did not say 1mn b/d, or 700,000 b/d. We did not [give any figures]. We said: any country producing less than its cap, should raise its production. But this does not mean that Venezuela's production should be produced by some other country. This is very clear. Venezuela will raise its production when it can. And if it cannot, others cannot come in and produce on their behalf. In the previous proposal, they could. Now, each country can only raise its own production. This is the basis [of our thinking]. What is that figure? That will come out. We do not know how much it will be. We want whoever can raise their production [within their allocation] to increase. We do not need them to comply more than 100pc. 100pc? Thank you very much. This is the spirit of what we are saying.

Now, what non-Opec does is their business. What was important for us is that non-Opec give us 600,000 b/d collectively. They can decide among themselves what to do. We today took a decision about Opec. Tomorrow, non-Opec might take a different decision. But the decision we took for Opec is very clear.

Was this signed today?

Yes. This was signed. Just as it came out in the press release - we signed it. It said that we will reaffirm what we approved before. It has divisions, a ceiling, numbers. We never said we should raise production by 1mn b/d. We never said such things. It is very clear.

Where did this 1mn b/d come from?

Yesterday, three scenarios were set out for us: one for 1mn b/d to be added by Opec, non-Opec; one to add 1.5mn b/d, and one to add 1.8mn b/d. In order to send a signal to the market, a group of countries repeated this 1mn b/d figure today. But the fact is that no such thing exists. We need to know what we are talking about regarding what we have already agreed. Our agreement today has no numbers.

We were looking, and it seems that Opec's own secondary sources show that over-compliance was 760,000 b/d last month.

Yes, but 600,000 b/d of this over-compliance was down to Venezuela. But if I may add something — total excess capacity in the world does not even reach 1mn b/d. These are the facts. Yesterday, when 1.8mn b/d was being discussed — who is going to produce this? Now, outside Opec, you have Russia, which can increase production by a little over 200,000 b/d. The rest comes, primarily from Saudi Arabia. Generally, most others are producing at their maximum levels. This is all talk that certain countries can produce 1mn b/d extra. They cannot. The world has run into problems in recent years in terms of excess capacity. There is no excess capacity, and there is very little investment for new production. And that production which is coming online is still not easily accessible [shale].

Is any country exempt?

Nigeria and Libya are still under the same conditions that they can collectively produce 2.8mn b/d. Not more.

Was the request from Iran to include something in the communique regarding sanctions against Iran even considered by the conference?

We discussed it. But I was always sure they would not accept it. It was clear that they would do no such thing. I did not make a political request. I asked them to condemn any kind of act of politicisation of the market as an organisation and say that the market should work on the basis of supply and demand.

How will Iran specifically be impacted by this agreement. Will there be any change?

If nothing was added to the market, that would have been to our advantage. But this was the minimum for us. Saudi Arabia accepted this, because they would ideally like more. We also accepted because, at the end of the day we want to live with Opec and we could not tell Opec they should continue with 150pc compliance. Our agreement was on 100pc, and that is what it is.

Are you optimistic that Iran's customers may be able to get waivers from the US government to continue importing crude from Iran, as they did during the last round of sanctions?

For the time being, no. I do not think Mr Trump will give waivers to anybody. This is not the time. He will put pressure on and see what happens. He is putting a lot of pressure on the Europeans to begin with regarding the off take [of crude], insurance and reinsurance, our shipping and banking sectors. It is not that sanctions will begin from November. They have already begun from now.