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15-07-2016

Despite Meteoric Oil Comeback, Iran "Will Be Maxed Out" by Year End: Analyst

Difficulty in finding partners and lack of resources are the main impediments in the Islamic Republic making further gains.

With 3.64 million barrels per day (bpd) pumped in May and exports having doubled to about 2 million bpd, Iran's re-entrance into the international marketplace has surprised many analysts – but some observers are saying its still shaky economy and other factors may stall its comeback.

Antoine Halff, a senior fellow at the Center on Global Energy Policy at Columbia University, told Bloomberg that, "to exceed presanctions levels would require investment and technology, and that's a much longer-term proposition."

Robin Mills, CEO of Qamaar Energy, and Peter Wells, an independent consultant, agree with this assessment: they think Iran will more likely level out at an production rate of 3.6 million to 3.8 million bpd.

The main stumbling block is the Islamic Republic's need for billions of dollars of investment and foreign technology to expand and modernize its aging wells, which were already performing below standards prior to the sanctions, according to the International Energy Agency.

In that regard, "They are doing everything they possibly can on their own while waiting to bring in foreign partners; the risk now is that it's not sustainable," said Bjornar Tonhaugen, an analyst with Rystad Energy AS.

Plus, given that many U.S. sanctions are still in place, "Companies are going to be very cautious about making new commitments to Iran; no one wants to run afoul of U.S. sanction law," Daniel Yergin, vice chairman of IHS Inc., told Bloomberg Television.

Arguably the harshest view of Iran's near-term potential was voiced by Mike Wittner, head of oil-market research at Societe Generale SA: he declared, "By the end of this year, Iran will be maxed out.

"Is it bullish? Yeah: when I look around the world and I need a bit more OPEC crude, I ask myself where it's going to come from."

Still, The American Interest website insists that despite its challenges, Iran has already become a thorn in the side of many other world oil producers: in a June 16 post it stated, "The actions of a post-sanctions Iran effectively sank a tentative deal to set an upper limit on oil production, and their intent to keep upping the ante will continue to undermine OPEC's already fractured cohesion."

Amidst widespread flip-flopping of the Organization of the Petroleum Exporting Countries members with regard to limiting global oil production, Iran steadfastly refused to participate in any production freeze proposals and said it would only consider limiting output after it has achieved its pre-sanction production levels.


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