Iran Raises Fuel Prices by 50 Percent, Cancels Cash Support to 34mn

Iran has raised the price of fuel by up to 50% during the next year’s budget and will move to cancel the monetary support of more than 34 million people. The price of the gasoline will reach 1500 tomans per liter (about 0.43 U.S. cents), a 50 percent increase, and the diesel will rise to 400 tomans from 300 tomans, the government’s website said on Tuesday as quoted by Al Arabiya.

The newspaper “Donya-e-Eqtesad” warned of fears of negative effects of high gasoline prices and quoted experts that the rate of inflation in the country will increase by 1% due to high fuel prices. It also warned against cash subsidies to the poor and said cash support would be canceled for 34 million people next year.

At the parliament, Wali Dadashi, a spokesman for the (Article 90) Committee of the Iranian Parliament, said he was strongly opposed to rising energy and fuel prices in the country and considered it a wrong decision taken during bad economic conditions.

The rise comes of the fuel prices comes while Parviz Fattah, head of the Khomeini Supply Committee in Iran, recently revealed that 20 million people are under the extreme poverty line, according to global indicators. Iran is witnessing labor protests against wage delays, low wages, rampant unemployment and poverty due to widespread corruption, which is reflected directly on the citizens and their standards of living.

Meanwhile, Iran’s biggest oil firm, the National Iranian South Oil Company (NISOC), plans to increase the output capacity by 340,000 barrels per day within a two-year period. The NISOC produces about 83 percent of crude oil and 16 percent of natural gas in the country.

An NISOC official, Abdollah Mousavi, said the company is ready to offer 240 well-drilling projects within the framework of Engineering Procurement Construction and Financing (EPCF) contracts in this regard, the press office of NISOC, reported.

Besides recovery rate maintenance projects, the NISOC plans to increase the daily output by 341,000 barrels within the next two years, Mousavi said. He further said that the company is planning to attract $4.3 billion worth of financing for developing 27 oil reserves and enhanced oil recovery (EOR) projects.

Iran’s crude oil output (excluding condensates) reached 3.83 million barrels per day (mb/d) in the third quarter of 2017, according to the U.S. Energy Information Administration (EIA). Iran’s crude oil production was about 3.8 mb/d before sanctions. The figure dropped by 1 mb/d in 2015 due to sanctions.

Western sanctions on Iran were eliminated in January 2016, and that led to a sudden increase in the country’s oil output and export levels.

At the same time, London-based Serica Energy that recently acquired a stake in Rhum Gas Field, co-owned by Iran, is willing to invest in Iran’s lucrative oil market upon the completion of the Rhum project. Tony Craven Walker, Serica’s executive chairman, made the statement in an interview with IRNA in London on Wednesday.  Serica Energy last month bought three fields on the edge of the British North Sea, including the Rhum field, co-owned by the National Iranian Oil Company, from London-based BP.

“Should things go well with Rhum gas field development, we will have close cooperation with Iran to increase crude output from oilfields,” Walker added, noting that the implementation of the Joint Comprehensive Plan of Action [Iran’s nuclear deal with world powers] has paved the ground for energy giants, including Serica, to expand collaboration with Tehran.

Asked about the newly-bought field from BP, Walker said, “We intend not only to boost the field’s production and lifespan but also to cut costs with the help of our partners, namely NIOC. Walker said Serica and its partner, NIOC, plan to renew drilling of a third well at the Rhum field next year.

According to Walker, 120 energy experts will join the mega project and a master plan will be devised by mid-2018 when the much-needed equipment is also transferred to the field. Attaching great importance to the field, he noted that Rhum accounts for 5% of England’s natural gas demand that is why expanding its lifespan at least for five years as well as enhancing the production level are of paramount significance.

“The field’s life will expire in 2023, yet with the help of NIOC, we are making concerted efforts to expand it as long as 2027. Serica will be in constant touch with the NIOC, BP and British officials to keep up with the latest development,” he added, noting that a snapback of U.S. sanctions cannot affect the British-based independent companies directly unless the European Union and Britain also implement a snapback and there is no indication that this is likely to occur.