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Lifting of Sanctions in Iran - Impact and Opportunities

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Oilfield Technology,

Frost & Sullivan Director, Carl Larry, comments on the lifting of sanctions on Iran’s oil industry.

Iran is home to the 4th largest oil reserves in the world and prior to its economic sanctions they also were the second largest producer of oil behind Saudi Arabia.  Production within the country was above 4 million bpd and their exports of crude had come close to 3 million bpd.  Aside from their crude oil production though, they do not have the refining capacity to support their economy. Gasoline was one of their largest imports and lack of natural gas and diesel was what had prompted them to pursue nuclear ambitions.

There will be an influx of foreign investment into this country as the country opens its economy. Here are a few ideas and questions we may have for the oil and gas industry within Iran.

  1. After only a year or such since economic sanctions were placed on the country, their oil producing infrastructure has suffered. As with any conventional production, a decline in activity will take its toll on the system. Most conventional oil production systems suffer from inactivity and lose efficiency quickly. There will be an importance placed on this system as Iran will want to get back up to speed as fast as possible. The questions now remains, "Who will be ready to step up and into Iran and support their upstream ambitions?"
  2. As Iran makes its way back into the market with its crude oil, the economy will grow as such. This will increase their demand for transportation fuels and we will see an increase of gasoline, diesel and jet fuel into the country. Many EU refiners will be happy to see such, but Iran is likely to start putting an emphasis on increasing its refining capacity to meet the growing demand. With their nuclear ambitions conceded, there will be money to turn attention to this area. How quickly will Iran focus on increasing their refining capacity? Will they look to balance out their crude production while increasing their capacity for refinery production?
  3. One of the biggest components of the bearish sentiment in the crude oil market regarding Iran is not so much their return to production, but the some 12 – 14 million bbls of ‘floating storage’ that is being held in the Persian Gulf on various tankers. Although these will be unloaded and the shipping market may also see pressure with newly available ships, Iran has been keen to learn the business and importance of oil storage. Will Iran look to increase on land storage capacity?

All of these ideas are pointing to an increase in demand not just for oil companies looking to share production, but perhaps a notable increase in oil services around this industry.

Adapted by David Bizley

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