The first step towards lifting sanctions on Iran’s oil production could be taken tomorrow (14 July) in a deal that would open up its territory to western nations and see the country’s oil exports double in the next six months is agreed.
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Image of Sarosh Zaiwalla. From Zaiwalla & Co. |
“Sanctions have crippled Iran’s oil production, halving oil exports in half and severely limiting new development projects. The prospect of them being lifted is creating great excitement within the industry, as foreign trade and investment will allow Iran to make huge efficiencies and drive down the cost of production,” Sarosh Zaiwalla, the international sanctions lawyer fighting sanctions on behalf of Iranian oil companies said. “With a nuclear deal imminent, it is clear that Iran is preparing to make up lost ground and re-establish itself as a major supplier.”
Following Russia and Venezuela, Iran has the third largest oil and gas reserves in the world, just ahead of the US and Saudi Arabia. Three-quarters of its total recoverable reserves are yet to be produced, says Wood Mackenzie.
Britain, China, France, Germany, and the US are all hoping to reach a deal with Iran over its nuclear program, in return for easing sanctions, which have put a hinder on its oil trade and economy.
On 10 July, the International Energy Agency expressed its concern over the abundant oversupply in the global oil market and stated, “the bottom of the market may still be ahead [as] the market’s ability to absorb that oversupply is unlikely to last.”
According to Zaiwalla, Iranian officials said that if a nuclear accord is reached and sanctions are lifted, Iran can double its oil exports in the next six months by producing 1 MMb/d.
Investors are reacting to the potential news of a nuclear deal with Iran, causing crude oil prices to take a tumble at about US$57/bbl. Brent crude for August fell $1.89 to a low of $56.84/bbl before rallying back to around $57.42 by 1500 GMT. US light crude, also known as West Texas Intermediate (WTI), was down $0.60 cents at $52.14/bbl, Zaiwalla said.
The deal that was set to be reached on 30 June, was once again delayed late last month pushing negotiations into a 21-month period.
Should the agreement be approved and western nations are able to enter Iranian territory, the western oil firms will still face regulatory and political challenges that could range from inefficient petroleum bureaucracy to heightened regional tensions, Wood Mackenzie said in June.
Wood Mackenzie also said that the deal is likely to be approved and that Iran presents a range of important oil and gas opportunities covering the whole value chain, from exploration to petrochemicals.
Read more:
Iranian hope remains, despite delayed deadline
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