Will OPEC decision help Iran’s depressed economy?

Business Materials 3 December 2016 15:06 (UTC +04:00)

Baku, Azerbaijan, Dec. 3
By Farhad Daneshvar – Trend:

OPEC’s recent decision on curbing the level of its output may have a positive impact on Iran’s plans to lure foreign investment in order to develop its strategic oil industry.

However the US Senate’s recent vote to extend the Iran Sanctions Act (ISA) for 10 more years as well as doubts over the OPEC members’ intention to honor their commitments regarding the production cut have cast shadow on the Islamic Republic’s capabilities to seize the created opportunity with both hands.
“If OPEC succeeds in implementing its decision to reduce its total production by 1.2 million barrels per day (b/d) and maintain the ceiling of 32.5 million b/d, the oil price will remain above 50 dollars per barrel and international oil companies will be encouraged to increase their capital expenditure for developing new oil resources,” Parviz Mina, a former member of OPEC Long-Term Strategy Committee, told Trend.
“Iran being a low cost area($12 per barrel) should benefit from it and attract foreign investment,” he added.
According to Iranian officials, the country plans to lure $130 billion in investment to develop its upstream oil sector by 2021.

Wood Mackenzie, a global energy, metals and mining research and consultancy group, earlier in June suggested that the volume of global upstream development spending from 2015 to 2020 declined 22 percent, or $740 billion, since fourth-quarter 2014.

According to the Iranian expert, OPEC's success depends on whether its members will commit themselves to reduce the output.
“If all of OPEC members do not adhere fully to their quotas, we might see another price decline,” Mina noted.
Although the OPEC decision was received in a positive way in Iran giving renewed hopes for an economic recovery in the sanctions-hit Islamic Republic, the extension of the existing US imposed sanctions against Tehran may kill off any lingering hopes for rebuilding the oil producing country’s stagnant economy.