Will new oil discovery increase Iran’s attractiveness?

Will new oil discovery increase Iran’s attractiveness?

BAKU, Azerbaijan, Nov.12

By Leman Zeynalova - Trend:

The recent announcement by the President of the Islamic Republic of Iran about a huge oil discovery is of course a political one, Francis Perrin, Senior Fellow at the Policy Center for the New South (PCNS, Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris), told Trend.

Iran’s President Hassan Rouhani announced on Nov.10 that the country has discovered a new oil field with 53 billion barrels of crude in Khuzestan province.

Iran currently has the world’s fourth-largest proven deposits of crude oil and the world’s second-largest deposits of natural gas.

The new oil field could become Iran’s second-largest field after one containing 65 billion barrels in Ahvaz. The field is 2,400 square kilometers (925 square miles), with the deposit some 80 meters (260 feet) deep.

“The intent is to show that, despite very harsh economic sanctions imposed by the U.S., Iran is able to go on developing its oil and gas sector with its national means, which means in particular the National Iranian Oil Company (NIOC) and its subsidiaries,” said Perrin.

He noted that the oil and gas potential of Iran is huge and this has been a well-known fact for decades.

“Before this latest discovery it controlled the world's fourth-largest proven oil reserves (behind Venezuela, Saudi Arabia and Canada) and the second-largest natural gas proven reserves (behind Russia). In October Iran announced a very big gas discovery. It is not the first time and it will not be the last one.That being said a little caution is required. We must wait for more geological and technical data in order to get a better idea of the size of this oil discovery. In any case it is huge but how much?” said the expert.

He believes that the figure of 53 billion barrels and the word ''reserves'' can be misleading.

“Reserves mean that Iran will be able to produce this amount of oil over a long period of time. But some other sources in Iran refer not to reserves but to oil in place in the reservoir, which is a different concept. If, for instance, the recovery rate is estimated at 20 percent, it means that this field's reserves are about 11 billion barrels (20 percent of 53 billion barrels) and not 53 billion barrels. Future data about the recovery rate, the nature and the characteristics of the reservoir, the gravity and the quality of the oil which has been discovered will be very important for a better assessment of the new discovery. But it is a huge one in any assumption, even if the recovery rate is very low (which is not known as of today),” noted Perrin.

It is thus very good news for Iran but in a long-term horizon, according to the expert.

“The key problem for the country now is the negative impact of U.S. sanctions which led to a 90 percent fall in Iranian oil exports between Spring 2018 and now. This new discovery will not change this reality. It will not increase Iran's attractiveness because oil companies already know that Iran has a huge hydrocarbon potential. But international oil companies (IOCs) are not ready to face the risk of U.S. sanctions despite this potential. The U.S. is today the largest oil and natural gas producer in the world; it is the superpower of our time; it controls the dollar which is the international currency; it manages a system of extraterritorial sanctions with a worldwide impact; and Donald Trump is at the White House,” said Perrin.

He noted that with or without the latest discovery IOCs will not invest large amounts of money in Iran with the threat of U.S. sanctions. “The oil industry and Iran are now waiting for the results of the 2020 presidential election in the U.S. next November to see if these sanctions could be (or not) lifted, suspended or reduced.”


Follow the author on Twitter:@Lyaman_Zeyn

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