U.S. Energy Secretary Confident in Ability to Compensate for Iran's Oil Production Decline

Rick Perry, the U.S. Energy Secretary, said on Friday that Saudi Arabia, Russia, and the United States are capable of compensating for the decline in Iran's oil production following the implementation of sanctions and other countries. Mr. Perry, who traveled to Moscow on Friday, September 14, stated in an exclusive interview with Reuters that the three mentioned countries could increase their production over the next 18 months to offset the decline in Iran and some other oil producers. He expressed a positive outlook on Saudi Arabia's ability to maintain and even increase its oil production levels. Reuters notes that there are concerns regarding Saudi Arabia's ability to sustain production levels and compensate for the decline in Iran and Venezuela, as well as potential disruptions in production from other countries (Libya, Nigeria, and others) in the long term. However, Mr. Perry mentioned positive signs regarding Saudi capabilities, particularly as the country and Kuwait are nearing an agreement on border disputes, which would allow for renewed production from a disputed oil field. The report does not mention the name of this oil field, but production from the Khafji field was halted in 2014 due to disputes between the two countries, and recently the parties have agreed to jointly exploit this field. If the parties reach a final agreement, the field, which has a production capacity of nearly 300,000 barrels per day, will be reactivated. The U.S. Energy Secretary also stated that significant growth in U.S. oil production over the next 18 months will exceed what has occurred so far. He also referred to the construction of new pipelines that will increase oil transportation capacity. The U.S. has halted shale oil production in some areas several times in recent years due to insufficient pipeline capacity. These pipelines are necessary for delivering oil to refineries or border oil terminals, especially in the Gulf of Mexico. According to a report from the U.S. Energy Information Administration this week, the average daily production of the country is expected to increase by 1.3 million barrels this year to reach 10.7 million barrels, and next year this figure will peak at 11.5 million barrels. Regarding Russia's determination to supply oil to global markets, Mr. Perry also stated that Russia is 'injecting oil into the oil markets with great determination': 'Thus, I do not think that (with the decline in oil production from Iran and Venezuela) oil prices will peak.' Recently, Russia increased its daily oil production by about 300,000 barrels to 11.25 million barrels and aims to raise this figure to 11.7 million barrels next year. The country has faced U.S. and European sanctions due to the annexation of Crimea to Russia. The United States has also imposed additional sanctions due to Moscow's attempts to interfere in the U.S. presidential elections. Mr. Perry stated that the ball is now in Russia's court to show constructive signs of its decision not to interfere in the elections of other countries and to behave peacefully with its neighbors. Russia has also been accused of poisoning Sergei Skripal, a former Russian intelligence officer, and his daughter in the UK. The U.S. Energy Secretary mentioned that he and his Russian counterpart, Alexander Novak, prefer that U.S. sanctions against Russia do not expand, which depends on Moscow's behavior; otherwise, even sanctions on the 'Nord Stream 2' gas pipeline by the Trump administration are entirely possible. This pipeline is set to transport 55 billion cubic meters of Russian gas annually through the Baltic Sea directly (without passing through Ukraine) to Germany. Despite the U.S. Energy Secretary's optimism, the International Energy Agency recently warned about the implications of the decline in oil production from Iran and Venezuela, stating that oil prices could peak above $80. Iran's oil and gas condensate exports last year were 2.5 million barrels per day, which has decreased to 1.5 million barrels this month. During the previous sanctions (2012 to 2015), Iran's oil and gas condensate exports fell to 1.1 million barrels, but this decline occurred over a longer period. U.S. oil sanctions against Iran are set to be implemented from mid-November.