Lifting sanctions not to pave way to immediate resumption of Iran’s oil export
By Trend
While Iranian officials say the country is preparing to resume
oil exports to pre-sanction levels, the doubts over Iran's ability
to do so are rising.
Expert believes that the Islamic Republic would face serious
problems in increasing its oil output immediately even if the
international sanctions are removed.
Iran and the P5+1 (the US, UK, France, Russia, China, and Germany)
reached a nuclear framework agreement on April 2 that raised hopes
for achieving a comprehensive nuclear deal by July 1 and lifting of
economic sanctions on Iran, including the restrictive measures
against oil export.
Iran should invest $10-15 billion per year to maintain the current
output rate of its oil wells, Iranian expert Reza Taghizadeh told
Trend April 14.
About 80 percent of Iran’s oil wells are in their second half-life
and are facing a fall in pressure, which leads to an output decline
of 8 percent to 13 percent annually as a result, according to the
U.S. Energy Information Administration (EIA).
Additionally, Iran’s revenues have decreased sharply as a result of
international sanctions, which forced the country to keep
investment for maintaining the oil output in its second plan,
Taghizadeh underlined.
Iran's oil export has decreased from 2.5 million barrels per day
(mb/d) in 2011 to the current 1.1 mb/d level. During 2011, Iran's
crude oil production was about 3.6 mb/d, but this figure stands at
below 2.8 mb/s, partly due to shutting down some fields in 2012
because of decreasing export volume.
Iranian expert further said that using oil wells in unproductive
condition is another problem for Iran, which means extracting oil
with the least cost and simplest technology, which harms the wells
and decrease their life over the long-term.
According to EIA, Iran hasn't started any new oil field since
2007.
Fatih Birol chief economist and future head of International Energy
Agency (IEA) said April 12 that the chance of a significant oil
export increase by Iran is very low at least in the next three to
five years.
Taghizadeh believes that in the course of five years after
sanctions are lifted, Iran’s crude output might increase but the
country has Iraq and Saudi Arabia as rivals in traditional markets
in particular in Asia, so finding markets for its increased output
also will be a problem. He emphasized that boosting Iran’s oil
output at least in the next five year is facing serious problems
practically, in particular due to vital need for investment in oil
fields.
In mentioning Iran's oil fields, the expert said if Iran had
increased its gas output it would be able to inject more gas to the
oil wells to maintain production level. He further said that the
country in particular in the past five years has injected saltwater
instead of gas to its wells to cover domestic gas consumption and
fulfill its gas export commitments.
Iran re-injects about 93 mcm/d of natural gas to old oil fields,
but the required volume is at least 170 mcm/d.
Taghizadeh also stated that even if Iran and West achieve a nuclear
agreement, only those sanctions that are imposed due to Iran’s
nuclear program are expected to be removed and the others will
remain in place.
“For instance removing the sanctions which came into force from
1996 and ban investment in Iran’s oil industry needs US
congressional approval,” he said.
“Even if congress approves that, the effects will indicate itself
in long term and Iran’s problem of absorbing investment for its oil
industry would not be resolved,” Taghizadeh added.
While responding a question about Iran’s possible oil export to EU
markets once the sanctions are removed, he said that every refinery
can refine a specific type of oil based on its sulfur percent and
changing feed of refinery needs at least three months.
Lifting sanctions would not lead to an immediate change in EU
refineries’ structure, he explained.
On the other hand, banking transactions are another problem and the
EU countries cannot barter oil with Iran as China does, Taghizadeh
said.
For instance, Royal Dutch Shell owes Iran almost $3 billion due to
oil trade from three years ago, he said, adding while the banking
transaction with Iran is not normalized, oil companies will not
welcome any new trade with the Islamic Republic.
So taking part in EU oil market in short term is not possible for
Iran, even if sanctions are removed, the expert underlined.
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