Tel Aviv: Iran’s oil reserves are in danger of becoming assets unless the new US administration eases sanctions that have left the country behind in production capacity and lost a race against time as the transition to low-carbon energy accelerates.
Iran, which sits on the world’s fourth-biggest oil reserves, relies heavily on oil revenues, but sanctions have prevented it from pumping close to capacity since 2018.
The fines have been sharpened under former US President Donald Trump. Although new President Joe Biden is more conciliatory, top officials in his government have said Washington will not quickly decide on Iran’s deal.
Iran’s leadership says sanctions have slowed down the moment oil is produced in its enormous reserves – and that the world will certainly need it.
But the increasing force of the global energy transition to lower carbon fuels, coupled with the impact of the coronavirus pandemic on energy demand, has led to predictions of when the world will reach the highest order – the point within which the consumption will decrease permanently.
Some Iranian officers, including Oil Minister Bijan Zanganeh, have repeatedly said Tehran needs to maximize production quickly – before the oil demand disappears, competing producers are left with market share.
However, the idea has been pushed back by factions that see it as a betrayal of future generations.
“The predominant story is still to keep production optimal in the long run – without realizing that time is running out – and exporting oil as a raw material, without appreciating the refinement, may not be in any case.” a long-term profitable business, “he said. Iman Nasseri, Managing Director for the MENA at FGE Energy Consultation.
Following Biden’s election, the government of Iran under President Hassan Rouhani instructed the Ministry of Petroleum in December to prepare installations for the output and sale of crude oil at their current total capacity within coming three months.
Provided sanctions are take off, analysts say Iran could increase the production of the current 2.1 million barrels per day (BPD) to a level ahead of the 3.8 million BPD sanction within a few months.
But the Iranian parliament last week rejected a draft budget based on the 2.3 million BPD production of the Iranian year starting in March, as lawmakers doubt any immediate easing of sanctions.
Decades of disruption due to sanctions mean Iran has even struggled to maintain its existing capacity, let alone reach its potential.
Over the past twenty years, most local competing producers, including the United Arab Emirates, Iraq, and Saudi Arabia, have each increased their production by one to two million barrels per day (BPD) and built additional capacity, according to the Organization of the Petroleum exporting countries shown.
Even before the new sanctions in 2018, the existing austerity measures kept Iranian production well below the 6 million BPD produced before its Islamic revolution in 1979.
Zanganeh unveiled an ambitious plan in December to increase production capacity to more than 6.5 million BPD by 2040. But analysts say it is unrealistic.
“There has been lost production capacity since mid-2018, and the sanctions have caused damage,” Nasseri said.
“It is possible that Iranian production could reach levels of pre-sanctions within months, but that it will require more time and significant investment than necessary,” he added.
According to estimates based on tanker tracking, Iran’s exports were as high as 2.8 million BPD in 2018 but dropped to around 300,000 BPD in 2020.
Simultaneously, a lack of funds and declining exports have forced Iranian energy companies to reduce the number of newly drilled oil resources from 300 in 2018 to 100 in 2020, an industry source said on condition of anonymity, further limiting growth potential.
This year, Iranian officials said exports had risen significantly as the Biden election made some buyers more willing to buy the risk of purchase Iranian crude oil. A senior lawmaker has given a figure as high as 900,000 BPD.
If the sanctions are lifted, Iran’s production level could exceed 4 million BPD by 2023, Rystad Energy predicted.
The FGE energy exceeded Iranian production by 4 million BPD by 2025, at about 5 million BPD before it started falling in 2037.
“Saudi Arabia, Russia, the USA, and large energy companies are already far ahead of Iran in securing a large share of the oil market share in the medium and long term,” said Sara Vakhshouri, founder and president of SVB Energy International.