* Iranian output cut could help fields -geologists
* Iran could shut in 10-20 pct of production -analyst
* Iranian official says expect to maintain sales
By Peg Mackey
LONDON, Feb 24 Europe's ban on Iranian
oil, aimed at piling pressure on Tehran over its nuclear
programme, may end up breathing new life into the country's
ageing oilfields, Western and Iranian oil experts said on
If Iran were forced to shut in any - or all - of some
500,000 barrels per day (bpd) of supply that would have gone to
customers in the European Union, such a move would help
rejuvenate, not harm, the Islamic Republic's oil reservoirs.
There is a widespread expectation among oil traders and
shipping brokers that Tehran will float much of the displaced
European oil on tankers, because it does not want to shut in
output and wreck the reservoirs.
But in actual fact, slowing Iran's current production of 3.5
million bpd would be the best thing for its overworked reserves,
say veteran geologists. And in the short term, the National
Iranian Oil Co (NIOC) may end up doing just that while it works
to re-route the oil.
"Iran can shut in 10 to 20 percent of its production without
damaging the reservoirs: in fact, it will do them some good,"
said Peter Wells of geological consultancy Neftex Petroleum. "If
it's done properly, shutting in the oilfields should be
beneficial as it allows the pressure to build back up."
Wells has first-hand knowledge of Iran's oilfields through
his work with Lasmo, now part of Eni, which has
invested in the country. He was confident that Iranian engineers
would be up to the task, because they have closed down parts of
their fields before for routine maintenance.
"If pushed, Iran could shut in about 500,000 barrels a day
without doing any harm," said Mehdi Varzi of UK-based Varzi
Energy. "But if a forced shut in were to drop output below 3
million, there could be problems in certain fields," said the
former NIOC official.
Although the EU embargo kicks in on July 1, buyers of
Iranian oil already are scaling back, and big customers in Asia
have also reduced purchases, leaving Tehran scrambling to find
new homes for around 500,000 bpd starting from March.
OPEC's second-biggest producer expects to place those
barrels with relative ease and in any case would be loath to
turn down the taps, lose revenue and look as if it were caving
in to sanctions.
Its current output allows for exports of about 2.2 million
Other Western oil experts with companies that have tapped
Iran's reserves agreed with Wells.
"Those fields are fairly flexible," said one of the
executives. "You might find when you start them up again it's a
Iranian engineers have been battling for years to get the
best out of Iran's oilfields.
But their capacity has slumped from just above 4 million bpd
several years ago as Western sanctions have prevented it from
securing urgently needed investment from foreign oil companies
or financing from foreign banks for its oilfields.
An Iranian official said Iran expected to maintain its oil
sales, rather than curb its output.
"Generally the market is big enough to absorb our crude,"
said Mohammad Ali Khatibi, Iran's representative on the board of
governors of the Organization of the Petroleum Exporting
Taking up to 500,000 bpd off the market would cost Tehran
little. A 17 percent gain in crude prices since December would
largely offset the decline in exports in terms of lost revenue.
And the calculation in Tehran may be that any decline in its
production will make oil more costly in the West. Oil above $120
a barrel is close to the maximum pain threshold for the
economies of the developed world.
(Additional reporting by Alex Lawler; Editing by Jane Baird)