OREANDA-NEWS. Iran is close to re-establishing its pre-sanctions share of the crude export market and will now prioritise production capacity.

The country's current crude output is 3.8mn b/d, and it exported slightly more than 2.2mn b/d of crude and close to 600,000 b/d of condensate in August, state-owned NIOC's international affairs director Mohsen Qamsari told Argus. "I have to say that for export volumes, considering the production, for the time being we have no problem."

"Nowadays, frankly speaking…our increase in production will be subject to new demand…otherwise there is no idle crude in our hands to look for more growth," Qamsari said.

Iran's market share in Europe, which was lost because of US and EU sanctions, has been fully reclaimed with exports reaching a little over 600,000 b/d in August, Qamsari said.

Currently, NIOC has no crude in offshore storage but does have a shrinking volume of condensate stored at sea. The volume is not as large as has been reported, Qamsari said, without giving a specific volume.

Iran is targeting production of 5mn b/d of crude in three year's time, Qamsari said, but he added NIOC would need foreign investment in order to push past its current production capacity.

"Without (investment), we can just continue the existing level of production of 4mn b/d… for any additional, definitely some investment should happen." He said some investment finance could be found domestically "but, if we are able to receive any international investment, it is going to give us more speed for increasing production."

Output rises from the West Karun cluster of fields will be key to Iran boosting its overall production capacity. NIOC plans to introduce its new heavy crude grade from the fields on the border with Iraq by December and has already won interest in the grade from sophisticated refineries in the Europe and Asia.

Current production from the cluster is almost 150,000 b/d, but this will rise to 300,000 b/d once the crude is segregated and, longer term the fields could produce 700,000 b/d, Qamsari said.

NIOC has previously said the grade will be around 24°API, making it a rival heavy sour grade to Iraq's Basrah Heavy, which has held a density of around 23-24°API recently.

Despite an improving atmosphere following the lifting of sanctions and more contact with international shipping and insurance companies, Iran is still unable to re-establish links with major European banks because the US has been slow in implementing sanctions removal, he said.

"I have to say the atmosphere is getting better. In some areas, like shipping, I have to say the situation is better, some companies are coming to Iranian ports. As far as insurance is concerned, it is also somewhat better, we are receiving some services from international insurance companies. But, on the banking system, still we have problems. Still the first class European banks are not ready to co-operate with us and it is the fault of the US and the American sanction authority. Although they have agreed, they are not performing their duty."

The announcement of sanctions removal has not been enough to assuage the fears of major European banks that were previously penalised by the US treasury, Qamsari said. "It seems that they are in need of some sort of green light from America…they are afraid to start and, maybe, they are in need of something in writing."

Suggestions that Iran had been forced to offer big discounts during sanctions and more recently in order to reclaim its market share were dismissed as mere "rumours".

"This matter of discount comes from people who are not familiar with the market. The price is, of course, very important but it is not the only instrument for marketing. We have plenty of instruments for marketing," Qamsari said, noting that efficient operations at Iran's main crude terminal on Kharg Island mean most loadings do not incur demurrage.

NIOC is likely to be the first state oil company to have sold directly to China's independent refinery sector, also referred to as teakettle refineries, after Beijing began liberalising imports last year, Qamsari said. The sales took place after sanctions on Iran were removed and coincided with the Chinese government's easing of restrictions on crude imports.

"A couple of big sized vessel cargoes we have sold to them without any problems, and we have discharged."

Some Mideast Gulf producers have made forays into supplying the teakettle sector. Teakettle Shandong Chambroad Petrochemicals bought a spot cargo of Arab Heavy from state-owned Saudi Aramco, but this seems to be an isolated case. Kuwaiti state-owned KPC has signed a framework agreement to supply Kuwait Blend crude to the 114,000 b/d Hongrun teakettle, in which state-owned oil company Sinochem holds a minority stake.

Teakettles refiners have had some trouble with the high sulphur content of Iranian crude, but it is an issue that can be resolved, said Qamsari.

"These teapot refiners are mainly designed for sweeter grades, and they are more familiar with ESPO crude, so generally speaking we have to say that some of them have difficulty with sour grades. So, we are ready to help them to actually make some blend or sending a suitable crude for them," Qamsari said.