Caren Firouz / Reuters An engineer looks at the Phase 4 and Phase 5 gas refineries in Assalouyeh, 1,000 km (621 miles) south of Tehran, January 27, 2011.

Tehran Tea

Why Oil Might Not Flow Fast from Iran

Even before the P5+1 negotiators struck a final agreement with Iran over its nuclear program, international oil companies and investors were already looking toward Iran's vast amounts of oil and gas. Iranian oil officials, too, have made bullish claims about the prospects for energy exports after sanctions are lifted, but the industry itself may not be quite ready.

The landmark deal with Iran was implemented on July 14 and will gradually suspend sanctions that have more than halved Iran’s oil exports. Iran currently sells about 1.2 million barrels per day of oil, down from 3.58 million barrels per day in the first half of 2012 while U.S. sanctions had been in effect since 2010, and then from 2.5 million in mid-2012, just before European sanctions took effect. Even as U.S. and European sanctions are phased out, Iran’s crude exports likely won’t rebound until at least mid-2016. And when they do, Tehran will face stiff competition as international oil prices have fallen, and competitors—namely Iraq, Kuwait, and Saudi Arabia—already have footholds in emerging Asian markets.

FIXING A CRUMBLING INFRASTRUCTURE

Iran’s once-prosperous petroleum industry has suffered tremendous setbacks since 1979. Tehran’s oil production prior to 1979 was over 5.8 million barrels per day with a potential capacity of 6.3 million, making it the world’s second-largest oil exporter and the fourth-largest oil producer. The nation had nine well-maintained refineries in operation and two more were near completion, giving Iran the ability to both satisfy domestic needs and generate exports.

Prior to the Iranian Revolution, the National Iranian Oil Company (NIOC) was well run and operated not only in Iran, but also managed international investments and refinery operations in India, South Africa, and South Korea. The NIOC had even reached a tentative agreement to enter U.S. markets to refine and distribute petroleum products, and was in the process of establishing similar ventures in Europe. 

In those days, Iran also had nascent plans to produce power from atomic energy. Almost all countries in Europe

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