Iran unlikely to significantly ramp up its oil export until 2016
Baku, Azerbaijan, April 10
By Aygun Badalova - Trend:
Iran is unlikely to be able to significantly ramp up its oil export until 2016 at the earliest, even if a final deal on Iranian nuclear program is reached, Thomas Pugh, commodities economist at British economic research and consulting company Capital Economics believes.
"The preliminary deal reached between Iran and the Western powers should, eventually, allow Iranian oil exports to return to their previous levels. However, some of the finer details still have to be ironed out and talks could still be disrupted by hardliners in both Washington and Tehran," Pugh said in a report, obtained by Trend.
Tehran and P5+1 (the US, UK, France, Russia, China, and Germany) reached a political framework for the ongoing nuclear talks on April 2.
The sides are to reach a comprehensive deal by July 1, in which Iran would restrict its nuclear program to some extent as demanded by the powers, and in return, the international sanctions on the Islamic Republic's economy would be lifted.
Oil prices initially fell by around 5 percent on the announcement but have since recovered all of their losses.
"There is unlikely to be much additional Iranian oil hitting the market this year, even if a full deal is signed in June, Pugh said. "Once sanctions have been lifted there could well be a surge in exports in the first few months as Iran sells its stores of oil, but ramping production up to previous levels is likely to take appreciably longer."
Economist mentioned that Iranian oil production has fallen dramatically since the imposition of the latest round of sanctions in early 2012.
"Once sanctions have been lifted, the Iranian authorities assert that the country could double exports within two months. This would be an increase of over 1 million barrels per day (bpd) to an already oversupplied market," Pugh said.
"Indeed, Iran does have considerable quantities of crude oil in storage, both on land and at sea, which could be sold as soon as sanctions are lifted. But little is known about how large these stockpiles actually are - estimates range from 7 million to 35 million barrels," he added.
The authorities have also claimed they would increase production to 4 million bpd within about three months.
"However, this assertion is likely to prove too ambitious. Many of the country's oil fields are ageing and will require a significant amount of time and money to be brought back into full production. Without a marked increase in production it will prove extremely difficult to maintain higher exports beyond a few months, even if stockpiles prove to be at the higher end of estimates," Pugh said.
Iran is currently selling oil to China, India, Japan, South Korea, Taiwan and Turkey. The country's oil exports have been cut to around 1.1 million bpd from at least 2.2 million bpd before 2012.
Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter:@AygunBadalova