Moscow (Platts)--17Jul2015/728 am EDT/1128 GMT

The expected increase in Iranian crude on the global market after sanctions against the country are lifted probably won't impact international oil prices significantly as the extra volumes are already priced in, Russia's energy minister Alexander Novak said late Thursday, adding that shale oil production costs are a more significant factor in pricing levels.

"I think there will be no significant impact because the market has already weighed in [the expected increase in Iranian supplies]," he told reporters in a briefing embargoed till Friday morning.

"The cost of shale oil production will have a more significant impact on prices," he said, adding that average shale oil production costs of between $50 and $65/barrel would become the "normal price for crude oil."

But more clarity is needed in respect of OPEC's production ceiling, specifically whether its members will adjust their production lower to accommodate increased Iranian output or whether the group will raise its 30 million b/d ceiling, he said.

Although the exact date for lifting sanctions on Iran has not yet been decided, most market watchers expect some new Iranian crude supply to hit international markets from early 2016.

Iran's oil minister Bijan Zangeneh said Wednesday it would take five or six months for sanctions to be removed, during which time Iran would prepare to increase production.

He reiterated that Iran would be able to double exports from the current 1 million b/d six months after the lifting of sanctions.

Novak also said that Russia expects to discuss the possibility of Russian companies returning to hydrocarbons projects in Iran in the autumn, during a planned meeting of the Russian-Iranian intergovernmental commission.

"If the sanctions are lifted, our companies would like to return to projects in which they took part previously," he said.

Among other international companies, Russian producers -- and Lukoil in particular -- withdrew from Iran after sanctions were imposed over the country's controversial nuclear program in 2010.

OPEC MEETING

Novak is expected to meet with OPEC Secretary General Abdalla el-Badri on July 30 in Moscow, as part of regular meetings Russia and OPEC have been holding recently to share their views on the oil market situation.

The parties are to discuss "the current situation on the oil market in respect of production and marketing volumes, including with the view of the situation around Iran," Novak said, declining to elaborate further on the issue.
Other topics for discussion will include new technologies for oil production and the merits of various taxation regimes used by oil producing and exporting countries around the world, he said.

Russia, one of the biggest world oil producers, has recently intensified contacts with OPEC and non-OPEC oil exporting countries following the significant fall in oil prices in the second half of 2014.

Speculation that Russia was looking to strike a production deal with OPEC peaked in late 2014, when Moscow held talks ahead of the November OPEC meeting with Saudi oil minister Ali Naimi and top officials from Venezuela and Mexico. No deal was reached, however.

COOPERATION WITH SAUDI ARABIA

Russian-Saudi relations have nonetheless been developing, with the two agreeing to boost energy cooperation when a major Saudi Arabian delegation visited St Petersburg in June.

Commenting on the recent talks with Naimi, Novak said the two countries shared the view that "there is no need for artificial cuts in production."

"There is also a common understanding that 'a normal oil price' is around $60-$65/b currently," he said.

Since signing the cooperation agreement, the two countries have already set up working groups to select projects that could be developed together, Novak added.

"At present, there are no concrete projects but there are intentions... to find common areas of interest," he said.

Between them, Russia and Saudi Arabia are currently producing in excess of 21 million b/d of oil -- more than a fifth of the world's total.
Russia's output reached a post-Soviet record high of 10.71 million b/d in May, while Saudi production was estimated at 10.3 million b/d last month.

A reluctance on both sides to reduce oil production as part of some kind of OPEC/non-OPEC pact in November last year was thought to have been a factor in OPEC's decision to roll over its 30 million b/d production target.

--Nadia Rodova, nadia.rodova@platts.com
--Edited by Alisdair Bowles, alisdair.bowles@platts.com

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