Sanction Free Iran to Accrue Strong Investment

Maritime Activity Reports, Inc.

July 20, 2015

After 10 years of diplomatic negotiation, the UN P5+1 countries (the U.S., the U.K., France, China, Russia and Germany) reached an agreement to unwind economic sanctions on Iran in return for significant international control and surveillance over its nuclear activities. The deal will revive foreign investment in Iran, as Western IOCs renew pre-sanction projects, notes energy industry market research and consulting company Douglas-Westwood (DW), who adds Brent dropped $1.15 to $56.70/bbl on the back of the announcement, with markets fearing a worsening of the global supply glut.

Iran holds the world’s fourth-largest oil reserves and second-largest gas reserves, while being the second largest OPEC producer after Saudi Arabia. In 2014 total Iranian production, heavily driven by gas and condensate production from the giant South Pars field, amounted to 6.7 mboe/d. During the sanction period, however, Iran had limited access to technology from the West and complex LNG export terminal projects stalled. Vast capital inflows will now be required to develop under-invested Iranian fields, however, due to the large reserves base, DW believes appetite to invest in Iran will be strong amongst major operators.

While no sanctions will be lifted before December, DW believes that Iranian liquids production will rise to a 2015 average of 3.5mb/d, based on pre-sanction production levels and available oil currently stored in storage tankers off Iran. Further production gains are expected as additional development phases of South Pars come onstream, while the removal of sanctions will clear supply bottle necks out of the Persian Gulf. IOC investment in the country’s huge potential will further boost production as sanctions are rolled back, though any new projects will see a lag of several years from lease acquisition to production phases.

Global oil prices have been weighed down in recent months by resilient U.S. production, record Saudi output, continued weakness on the demand side and the Grexit prospect. While commodity prices are unlikely to be aided by an opening of Iranian taps, the true tidal wave of Persian crude could be later rather than sooner, DW says.

Maritime Reporter Magazine Cover May 2019 - Propulsion Annual - Green Marine Tech

Maritime Reporter and Engineering News’ first edition was published in New York City in 1883 and became our flagship publication in 1939. It is the world’s largest audited circulation magazine serving the global maritime industry, delivering more insightful editorial and news to more industry decision makers than any other source.

Maritime Reporter E-News subscription

Maritime Reporter E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

Subscribe for Maritime Reporter E-News