Center for Strategic Assessment and forecasts

Autonomous non-profit organization

Home / Economy and Finance / Markets: estimates and projections / Articles
Iran: oil sanctions and reality
Material posted: Publication date: 15-09-2014

In 2014, the United States suspended some sanctions against Iran. As stated in Washington, this decision was made in connection with the progress made in the negotiations on the Iranian nuclear program.

In particular, the ban on the purchase from Iran of petrochemical products, is allowed to supply Iran with spare parts for the maintenance and safety of civil aviation. However, the ban still applies to individual firms entered in the special list of the Ministry of Finance of the USA. It is stressed that the decisions taken in the period from 20 January to 24 November.

Доля иранской нефти в нефтяном импорте стран
The share of Iranian oil in the oil importing countries


Nevertheless, even the partial withdrawal of sanctions on purchase of Iranian oil will increase the revenues from exports of oil and oil products, which is the main source of foreign exchange and the formation of the revenue part of the state budget of Iran. Moreover, they provide economic growth in Iran and accounted for slightly more than 85 % of foreign exchange earnings and 75 % of revenues in local currency (Riyal) Islamic Republic of Iran. For example, in 2001 in Iran's oil was extracted in the range from 3.4 to 4.1 million bar. a day. In total, this year produced 182 million tons of oil, of which 112 million tonnes went for export. In connection with the established high level of world oil prices, foreign exchange earnings in the country at $ 3 billion. exceeded recorded in the state budget and the amount was 16 billion US dollars.

Евросоюз отказывается от иранской нефти
The EU refuses Iran's oil

Oil reserves Iran ranks 4th in the world (after Saudi Arabia, USA and Russia). Total reserves amount to 370 billion barrels (50 billion tons). The proven reserves, according to various expert estimates, ranges from 96 % to 100 billion bar. (13-13,4 mlrd.). The share of Iran in world production of crude oil is about 5.7 %.

From officially confirmed oil reserves 87 % are overlain by deposits in the province of Khuzestan (the main of which are Gachsaran, the Bibi Hakim, Ahassle field, the Al-Soleiman, Haftgel, Naft-Sefid, yeah-Gary (consists of deposits of Karanja and maroon) and the Man) and offshore fields of the Persian Gulf, which produces 0.6 million bar. a day. The costs of development and production of crude oil in Iran are only 3-4 dollars per barrel, and on some continental deposits, these costs are even less.

In recent years the country has intensified exploration for oil and gas. Thus, in 1999-2001 the increase in proven oil reserves amounted to 50 billion bar., while for 1979-1998, the figure was only 10 billion bar.

Over the last two years the increase in proven natural gas reserves totaled 1.4 trillion cubic meters Almost all of the oil discovered in the southern parts of the country. For individual deposits of explored oil reserves are distributed (in billion bar.): Azadegan — 25; Kushk — 11; Mansurabad — 4,5; South Pars — 6; Caslle — 1.

In the coastal waters of Iran in the area of the Northern shallow part of the Gulf (desert zone in the Abadan) discovered a new oil field, whose reserves are estimated at 26 billion bar., and in the area of Ramhormoz (Khuzestan province) discovered a new field of natural gas, the volume of which is estimated at 40 billion cubic meters.

Since 1999. Iran is actively engaged in the exploration of oil and gas in the North of the country and, in particular, on the shelf of the southern sector of the Caspian sea, but because of the unresolved question of its section production is not yet underway. Exploration was undertaken of the national Iranian oil company (them to Inoc) with the participation of the British company "Lesmo" and the British-Dutch "Royal Dutch shell".

The reserves of discovered fields are estimated at 10 billion bar. of oil and 560 billion cubic meters of gas. The cost of producing one barrel of oil in this area could be 5-7$. USA.

The total reserves of oil and gas in the offshore area of the Caspian sea is estimated at 30 billion bar. and 12 trillion. cubic meters of gas.

Production capabilities of the oil industry of Iran today constitute the 4 million bar. a day. The main buyers of Iranian oil to remain oil companies of Japan, South Korea, China, Italy, Germany and India.

The rapid growth of consumption of oil products both within the country and with regard to Iran's quest to maintain their share in the total production of oil within OPEC, which in volume will increase (the demand for crude oil on world markets will grow annually in the range of 1.5 million bar. per day), requires the oil industry of Iran urgent action aimed at increasing the level of production of crude oil and gas. The main objectives in the formation of policies aimed at the development of the oil and gas industry, are:

- the primary joint development with other countries in oil and gas fields;

- saving quota of Iran in OPEC;

- attraction of investments for development of oil and gas fields;

- using advanced technologies to develop oil and gas fields;

- the preservation of the sovereignty of the Iranian oil and gas fields;

- attraction of transit of the Caspian hydrocarbons to world markets through Iranian territory;

- expansion of production of natural gas;

- increased use of gas as fuel instead of other petroleum products.

The Ministry of oil of Iran developed projects to increase production capacities of the industry for the long term, since Iran hold their position in the group of leading oil-producing countries need over the next two decades to increase oil production to 8 million bar. on the day, i.e. to increase its production about 2 times. The implementation of such a programme will require additional investment in this sector, at least $ 21 billion. USA.

In order to improve the management of manufacturing enterprises established regional oil and gas companies. According to oil Minister Zanganeh B., the creation of regional companies will help to increase oil and gas production and revenue growth from the sale of hydrocarbons. For the first time in the post-revolutionary period the government and Parliament of Iran has accepted the decision on liquidation of the state monopoly in the oil industry of the country.

The Iranian government has also developed a set of measures for structural reform of the country's oil industry. These activities include:

- decentralization of sector management;

- the governance reform and increase the efficiency of the industry;

- the privatization of a number of agencies and companies entering into system of the Ministry of oil.

To ensure sequence of development of the oil and gas industry in Iran needs annual investments of at least $ 10 billion. USA. According to experts, at the current stage, Iran urgently needs $ 3 billion. the expansion of the existing production facilities and $ 2.5 billion. to compensate for falling oil production from existing wells.

Министр нефти ИРИ Бижан Зангане
The Minister of oil of Iran Bijan Zanganeh

So, due to the pressure drop on the number of wells in southern fields, caused by intensive production of oil, in early August this year, Minister of oil of Iran Bijan Zanganeh gave a special order to the heads of oil and gas companies to increase gas injection into these wells in order to extend their functioning.

As is known, the injection of gas into oil wells increases the reserves of recoverable oil, reduces the cost of production and stops the pressure drop in wells on old fields. In addition, injected into the well natural gas may eventually be ejected.

According to official data, authoritative research institutes, it is now possible to inject in oil wells of up to 600 million cubic meters of gas per day. The fix of such amount of gas per well for 30 years will increase the volume of recoverable oil with current 155 billion barrels of 225 billion barrels. Experts believe the annual increase in the coefficient of oil recovery rates by one percent increases the oil reserves of Iran some 7 billion barrels.

In recent years, Iran has signed with foreign companies 12 major agreements on the development of its oil and gas sector in total at $ 15 billion. USA. The projects will be implemented with the participation of Iranian and foreign sources of financing, as well as foreign technology. It is expected that after implementation of these contracts in Iran will be an additional $ 340 thousand bar. crude oil and 214 million cubic meters of natural gas per day.

However, the participation of foreign companies in Iranian oil and gas projects is restricted by U.S. sanctions against Iran and Libya, according to the law D'amato. This is true of several large companies, including such as the Franco-Belgian "Totalfina-Elf" Anglo-Dutch "Royal Dutch shell". Today, Italy's ENI and its subsidiaries "Agin", Malaysian "Petronas", and several Russian companies led by Gazprom are already involved in the implementation of some Iranian oil and gas projects and compete in a declarative Iran international tenders.

Representatives of the American companies participate in international conferences and seminars on the problems of the oil and gas sector of Iran and the region. There is information about the bids of these companies to participate in tenders on certain projects (as observers with the purpose of obtaining information).

Speaking about the state and prospects of development of the oil and gas industry of Iran, one cannot ignore the fact that Iran is a member of the Organization of countries-exporters of oil (OPEC), and production of crude oil in the organization takes the second place after Saudi Arabia, with a quota of 14.6 %.

Note: OPEC includes 12 countries: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela.

Организация стран-экспортеров нефти (ОПЕК)

The organization of countries-exporters of oil (OPEC)

By the decision of OPEC quota of Iran in oil production in 2001 amounted to $ 3,916 million bar. a day. From 1 February it totaled 3,698 million bar., as of 1 September, was reduced to 3,406 million bar. a day. In 2012, Iran had produced almost 3.7 million barrels per day, of which 2.5 million barrels were exported. For example, in October 2012, the oil exports from Iran fell to 715 thousand barrels per day. This is the lowest level since January 2012 — the date of introduction of the oil and banking sanctions against Tehran.

Note: the Council of the European Union at the level of foreign Ministers approved the introduction of oil embargo against Iran from July 1, 2012. Oil supplies from Iran were banned in response to Tehran's refusal to abandon sensitive nuclear research.

China, India, Japan and South Korea — the largest Asian buyers — have cut imports of Iranian oil by 21 %, 15 %, 39% and 36%, respectively. Total imports to these countries from Iran declined to about 1 million barrels a day from 1.4 million barrels a day.

Embargo on the import of oil from Iran caused a significant increase in demand for Russian Urals blend. According to analysts, in the medium term the EU can be more cost effective to replace Iranian oil in their imports of oil from Saudi Arabia, however at the moment it is the purchase of Russian Urals seems to be the most acceptable solution for many former consumers of oil from Iran.

The jump in demand for Russian mixture is largely due to the reaction of the Italian oil company Eni and Turkish Tuprash on the entry into force of the embargo. Largely dependent on Iranian supplies to Italy and Turkey last tried to use a delay, and on 1 July began to actively buy Russian oil.

At that period, Iranian oil has gained 23 countries, now only China, India, South Korea, Japan, Turkey and Taiwan. And Malaysia, South Africa, Singapore and Sri Lanka stopped its purchase.

Самые крупные импортеры иранской нефти
The largest importers of Iranian oil

In 2014, in connection with a certain progress in Iranian-European negotiations on the Iranian nuclear issue, these countries for the next six months once again brought out of the scope of the sanctions regime operating in the USA against buyers of Iranian oil. Before these sanctions, Iran took the OPEC's second largest crude oil production, with the imposition of sanctions it dropped to sixth.

In December 2013, in Vienna, the Organization of countries-exporters of oil at the Ministerial conference took a decision not to change quotas and fixed the limit parameters of the oil production volumes in 2014 at 30 million barrels a day. Though in 2013, OPEC increased production to a record level of 31.36 million barrels per day amid rising demand and despite substantial growth in production in North America.

Крупнейшие покупатели иранской нефти
The largest buyers of Iranian oil

At the meeting it was unanimously decided that in case of need 12 member countries of OPEC will take consistent steps to ensure market equilibrium. Members reiterated their willingness to firmly respond to developments that adversely affect the stability of the oil market.

In a press communiqué from the meeting it was mentioned that since 2014 the price of oil relatively stable. The demand for oil globally, 90 million barrels a day in 2013 has increased to 91,1 million barrels in 2014. It is expected that the quantity of oil supplied to the world market by countries outside OPEC will increase by 1.4 million barrels.

During the meeting it was stressed that, although the rate of growth of the world economy rose from 2.9 % in 2013 to 3.4 %, still there is a danger of the economic downturn on a global scale.

Since December of last year the situation in Iran, Libya, Ukraine and other hotbeds of international tension had a negative impact on oil supplies to the market, therefore the price of oil has increased by approximately 10 % and remained at over 100 dollars per barrel.

In late 2013, OPEC analysts prepared the annual report in which it predicted that the oil price in the period until 2035 will remain fairly stable and will increase to $ 160 per barrel. Experts also believe that global energy demand by 2035 will increase by 52 percent, and over 80 percent will be funded from the extraction of natural resources.

Thus, Iran is increasing its capabilities in oil and is ready to significantly increase its exports to interested buyers.


RELATED MATERIALS: Economy and Finance
Возрастное ограничение