Iran’s return to world oil markets
What does it mean for production, markets, and investment opportunities?
The agreement announced on July 14, 2015, between Iran and the P5+1 countries (China, France, Russia, Germany, and the US) seeks to resolve the long-standing impasse between the parties, lifting economic sanctions in exchange for constraining Iran’s nuclear program.
The imminent return of Iran to global oil could reshape global oil markets. If all goes according to plan, we expect to see:
- A fairly rapid increase to Iranian exports once sanctions are effectively lifted
- Iranian exports beginning to rise in early 2016, both from the sale of oil in storage and from increased flows from older fields, although we do not foresee them causing a further dramatic decline in oil prices
- Foreign investment returning to Iran, but not until the 2020s
- Total Iranian crude oil production in 2016, on an annual average basis, possibly ranging from 3 to 3.7 million barrels a day
Iran’s National Oil Company has a long history of successful development and operations. It has highly qualified and experienced engineers and managers, adequate technology, and the direct experience of working in Iran. Even if foreign investment arrives slowly, Iranian oil production has good prospects for a revival during the next decade.