Save for later Print Download Share LinkedIn Twitter Just four months after the lifting of Western sanctions, and counter to the expectations of many, Iran has largely met its self-imposed target of swiftly ramping up crude exports by 1 million barrels per day. This is notable for two reasons. Firstly, the higher volumes are the result of increasing production rather than drawing down stocks, which means Iran's oil fields, mostly in the west of the country, were able to handle the rapid ramp-up despite sitting idle and suffering underinvestment during the years of sanctions. And secondly, the marketing department of state National Iranian Oil Co. (NIOC) has managed to sell this additional crude, even in today's oversupplied market and despite traders' complaints that Iran was setting official selling prices too high and offering too few incentives for buyers. Only a month ago, Iran's post-sanctions oil revival seemed to be losing momentum, particularly in Europe, which saw imports of Iranian crude fall in March versus February (PIW Mar.28'16). But driven by purchases from Asian customers, new term buyers lining up in Europe, and Total lifting some 230,000 b/d last month, this trend appears to be changing. Iran's oil exports jumped to nearly 2 million b/d last month, shipping data shows, some 400,000 b/d above March levels and almost double the volume seen under sanctions. The latest figures suggest that Iran's oil production now is just 200,000 b/d short of its pre-sanctions output of 3.7 million-3.8 million b/d. There are also signs that Iran has been able to overcome obstacles related to lingering US restrictions on dollar payments. Despite the lifting of sanctions, which has enabled several Iranian banks to reconnect to the international Swift payment system, lenders in Asia, Europe and elsewhere still have to ensure that they don't clear US dollar transactions with Iran through US financial institutions. This restricts Iran's business with foreign companies, but NIOC is working around this, intensifying efforts to secure payments for its crude exports in euros. It has enjoyed some success -- India has agreed to switch to settling its crude bills with Iran in euros under new term agreements that came into force in April, and other Asian customers such as China, Japan and South Korea that currently pay in their local currencies could follow suit. "We are talking to receive euros from our Asian customers," a senior NIOC official told PIW. Although Tehran could use local currencies to pay for imports of products, services and commodities, payments in euros give it greater flexibility. Uncertainty remains over whether the export numbers are sustainable, or reflect a monthly aberration because some delayed March loadings might have slipped into April. But what is clear is that Iran has managed to reclaim many of its former customers in Europe, which last month imported around 500,000 b/d of Iranian crude, shipping data shows, with Total, Spain's Cepsa, Italy's Iplom and Greek refiners Hellenic Petroleum and Motor Oil all resuming liftings. A term contract is also understood to have been reached with Spain's Repsol, while negotiations are ongoing with Italy's Eni. Initial payment obstacles are being addressed, one industry source says, noting that payment for one cargo to Greece was channeled through Total. If Egypt allows Iran to restart using the Sumed oil pipeline and storage at the Mediterranean port of Sidi Kerir, exports to Europe could further benefit. Iran currently has to ship crude to Europe around Africa via the Cape of Good Hope, or use smaller Suezmax tankers that can pass through the Suez Canal. In Asia, demand from key customers China, India and South Korea remains on an upward trajectory. China was the biggest single buyer of Iranian crude in April, lifting nearly 800,000 b/d, up from 514,000 b/d in March, shipping data show. There are also good prospects for Indian customers, notably private-sector refiners Reliance and Essar, to increase their purchases, another NIOC official says. There has been strong interest from Indian buyers in Iran's new West of Karun grade, which will compete with Iraq's Basrah Heavy. This could help lift India's average monthly imports from about 450,000 b/d to 550,000 b/d or more, the official adds. But initial production of the grade has now been delayed from March to the fourth quarter. Even if demand for its crude remains buoyant, maintaining export levels in the longer term will depend on Iran's ability to attract investment to upgrade its ailing oil infrastructure and introduce enhanced oil recovery techniques to address high natural decline rates. This in turn will depend on whether Iran's planned new upstream contract, due to be launched this summer, will be sufficiently attractive for international oil companies (PIW May9'16).