Last week, Rostam Ghasemi, the Iranian oil minister, said that his country plans to increase its productive capacity of crude oil to about 5.5 million barrels per day by March 2016 through investments estimated to be worth $ 400 billion. Remarkably, the plan in question is still being discussed by the Iranian parliament, which has yet to approve it, while the allocation of $ 400 billion by the Ministry of Oil is no easy matter. Particularly so when the country continues to suffer from the brunt of a Western embargo, and a boycott by most oil companies, technical services companies and international banks in compliance with the laws in their respective countries. Thus, it will be extremely difficult in such tough circumstances to increase the output from 2.9 million barrels per day in December 2012, to about 5.5 million barrels per day in March, 2016. The question that arises is this: Does Iran have the ability to raise its productive capacity to 5.5 million barrels per day? Well, this question can be answered thus: Iran produced approximately 6 million barrels per day before the Islamic revolution. In the 1990s, Iran sought to no avail to reach an output of around 4 million barrels per day. The productive capacity remained at or below 3.5 million barrels per day only, despite the surge in oil prices. After the large drop in production which was now suspended in many fields, it will not be easy to return to the previous productive capacities without completing many projects to rehabilitate the fields first, a time-consuming process that requires large investments. It is worth mentioning here that both Iraq and Venezuela underwent similar experiences in the past decade. Now, with the embargo having persisted for over a year and the further tightening of the sanctions with time by both the EU and the U.S., and despite Ghasemi's statements to the Committee on Planning and the Budget in Parliament last week in which he stated that oil exports dropped nearly 40 percent and that the value of exports dropped nearly 45 percent because of the sanctions, it is hard to believe the news about allocating $ 400 billion for the development of the oil sector. Indeed, where will Iran get these huge amounts of money in such a short time, when the country is under a harsh blockade that makes it difficult to obtain hard currency? This reality has led to a large shortage of dollars in the local markets, let alone many goods, especially basic medicines. When the Minister of Health complained about this publically, she was sacked. As usual with such embargos that have been imposed on other Middle Eastern countries as well, the value of the local currency collapsed and inflation plagued the economy. So why did Ghassemi make these statements about allocating $ 400 billion to develop the oil sector, when this money is unavailable in the state's treasury, and when it is not possible to secure such sums at this period? Do these statements fall under electoral propaganda before the presidential elections in June, 2013? Does Ghassemi, who was appointed minister of oil after serving in the Revolutionary Guards, believe that the Iranian citizens are not aware of what is happening around them? After all, is there anyone who is more concerned and aware of the affairs of his country and region than the people of the Middle East, especially those who have suffered enough from the adventurous policies of their governments? Most definitely, the first answer to Ghassemi will come from the MPs, who will wonder how $ 400 billion will be secured from a treasury that is almost empty of hard currency. Ghassemi's statement was quoted by an MP at the planning committee, prompting a strongly-worded retraction by the official spokesman of the Ministry of Oil, which requested that the Oil Minister not be quoted without the approval of the ministry first. In truth, this statement is not directed at the domestic public opinion, but at the minister's counterparts in OPEC. It is an indirect warning against Iraq being given a productive capacity quota that is large than Iran's. The ministerial meetings of OPEC in the near future are expected to discuss the issue of Iraq's quota. But it is clear that the statements of the Iranian minister have no basis in reality. Indeed, Iraq's current output is slightly above 3 million barrels per day (about 1 million barrels per day more than Iran's output). The Iraqi output is expected to rise to about 3.7 to 3.8 million barrels per day by the end of this year. There are clear indications (despite Iraq's many problems) that work is underway and in full swing to increase the productive capacity to much higher levels. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
