A new risk in the ambush of Iranian oil production
Western analysts estimate in a new analysis that as US oil sanctions against Iran continue, Iran’s oil reserves are at risk of becoming low-value assets as the transition to low-carbon energy accelerates.
According to ISNA, Iran has the fourth largest oil reserves in the world and is dependent on oil revenues, but sanctions have affected the country’s production capacity since 2018.
Sanctions were tightened during Donald Trump’s presidency, and although current US President Joe Biden has been conciliatory, senior government officials have said Washington will not make a quick decision on a deal with Iran.
The acceleration of the global energy transition to low-carbon fuels, coupled with the impact of the Covid 19 pandemic on energy demand, has pushed forward forecasts of a peak in global oil demand after which oil consumption will decline permanently.
Some Iranian officials, including Oil Minister Bijan Zanganeh, have repeatedly stated that Tehran urgently needs to maximize its production capacity before demand for oil disappears and rival producers seize what is left of market share. However, factions that consider such an action a betrayal of future generations have opposed such an idea.
Iman Naseri, director general of the Middle East division of FGE Energy Consulting, told Reuters: “The prevailing narrative is still to optimize production in the long run and to avoid exporting oil as a raw material without realizing that time is being lost and gained.” And refining oil may not be profitable in the long run.
Following Biden’s victory in the US election, the Iranian government in December ordered the Ministry of Petroleum to prepare its facilities for the production and sale of oil at full capacity within three months.
Analysts say that if sanctions are lifted, Iran could increase its production from 2.1 million barrels per day to 3.8 million barrels per day before the sanctions in a few months.
But next year’s budget, based on production of 2.3 million barrels per day of oil, was not passed in parliament last week as lawmakers questioned the immediate easing of sanctions.
While decades of sanctions have affected Iran’s oil production capacity, OPEC statistics show that most regionally rival producers, including the United Arab Emirates, Iraq and Saudi Arabia, have produced between one and two million barrels per day in the past 20 years. Have increased and created surplus production capacity. Even before the new sanctions in 2018, previous sanctions kept Iran’s oil production below six million barrels per day, which was pre-revolutionary production levels.
Zanganeh unveiled a plan in December to increase production capacity to more than 6.5 million barrels per day by 2040, but Western analysts say such a plan is unrealistic.
Iman Naseri said in this regard: “Certainly, production capacity has decreased since mid-2018 and sanctions have caused damage.” Iran can return production to pre-sanctions levels within a few months, but further production increases will require significant time and investment.
A lack of access to adequate funding and reduced exports have forced Iranian energy companies to reduce the number of new oil wells from 300 in 2018 to 100 in 2020, an industry source told Reuters.
With Joe Biden winning the US election this year, Iranian officials say oil exports have risen significantly and some buyers are willing to take risks to buy Iranian oil. A representative put export statistics at 900,000 barrels per day.
Ristad Energy Research Institute predicts that if sanctions are lifted, Iran’s oil production will exceed four million barrels per day by 2023.
The FGE Institute also expects Iran’s oil production to exceed four million barrels per day by 2025, to remain stable at about five million barrels per day, and then to decline in 2037.
But Iranian oil is mainly heavy and sour oil, which is more polluting than lighter oil grades, and its refining costs are higher to meet environmental standards, which are becoming more stringent every day.
“Saudi Arabia, Russia, the United States and major energy companies are now ahead of Iran and have a large share of the oil market in the medium and long term,” Sarah Vakhshuri, founder and president of SVB Energy International, told Reuters, according to Reuters. Have guaranteed.