Kemp: Iran Needs Time And Favorable Conditions To Boost Oil Output

Kemp: Iran Needs Time And Favorable Conditions To Boost Oil Output
Iran has big ambitions to increase oil and gas production but a substantial increase in exports is probably years away.




John Kemp is a Reuters market analyst. The views expressed are his own

LONDON, July 15 (Reuters) – Iran has big ambitions to increase oil and gas production once sanctions are lifted but a substantial increase in exports is probably years away.

The country has the world's fourth-largest proved reserves of crude oil (behind Venezuela, Saudi Arabia and Canada) and the largest proved reserves of natural gas (ahead of Qatar and Russia), according to BP.

It is the oldest major oil producer in the Middle East and output peaked at more than 6 million barrels per day (bpd) in 1974 (

But decades of revolution, war and sanctions have cut production of crude and condensates to just 3.6 million bpd in 2014 ("BP Statistical Review of World Energy" 2015).

In contrast, Saudi Arabia, Iran's main rival, has raised liquids output from 8.6 million bpd in 1974 to 11.5 million bpd in 2014.

Recovery Hopes

Sanctions imposed by the United States and the European Union amid concerns about Iran's nuclear programme have hit Iran's production and exports particularly hard.

Exports of crude and condensates have been cut from 2.6 million bpd in 2011 to 1.4 million bpd in 2014, according to the U.S. Energy Information Administration ("Under sanctions, Iran's crude oil exports have nearly halved in three years" June 24).

Following the conclusion of the nuclear negotiations with the major powers, Iran hopes to raise oil production and exports significantly.

Oil Minister Bijan Zanganeh has stated the country will reclaim its former market share and could raise exports by 500,000 bpd immediately after sanctions are lifted and boost production to 4 million bpd in less than three months.

"We want to reach our pre-sanctions capacity," the managing director of the National Iranian Oil Company (NIOC) said in a newspaper interview published on Wednesday.

"Iran's oil production capacity was 4 million barrels a day before the sanctions. We can reach that if there is demand in the market," he said.

Iranian officials have spoken of raising production to 5 million bpd or more over the longer term by attracting foreign investment and have opened preliminary discussions with international majors.

Even a small addition to production and exports could have a big impact on prices given the oversupplied state of the global oil market.


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Asghar Ali Syed | Jul. 17, 2015
That is true that Iran has passed through a big pause on high production of crude oil due to sanctions and has gone to economical slow down as well. However, as per the news floating around there are companies waiting for agreements signing for development and restoration of productions. Drafts for MOUs for many of them are already cleared. The time in next six month will open up how well was Iran internally prepared to welcome lifting of sanctions. In OPEC it may not be a matter of competing Iran but what it need is approach to support in the greater interest of consumer, humanity and securing benefits for global economics for OPEC member countries. Iran is moving in slow profile does not mean it is weak. As a nation they have proved capabilities, patience and tolerance. I think they are very well prepared it is a matter of time.

Dr. Tom Williams | Jul. 15, 2015
The author forgets an important element in business - can you trust the producer/buyer....Having worked in Dubai for 10+years...nothing left the yard for Iran unless it had been paid for 100% before it went on the boat/ one could trust full payment. Who is going to invest in Iran now...maybe things have changed or can change in 2016. Reserves - remember they and KSA have been skimming the primary production and lots of oil can be produced by secondary or enhanced recovery operations but that takes investments and who or at what risk rates would invest for complex recovery systems and controls required. Also will the KSA keep the OPEC in line and will Iran keep to Saudi imposed quotas...when others drove the Saudis to hammer them in Nov.2014?? Next two years will be very important for all Oil&Gas - $40/bbl-$2/MMBtus????


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