Iran risks having its massive crude oil assets become stranded unless the United States lifts the sanctions that the Trump administrations imposed on Tehran three years ago, Reuters has reported, noting the sanctions have prevented the country from boosting its production capacity as other major producers have done.
Iran said last month it was already beginning to ramp up crude oil production in anticipation of the removal of sanctions, but this has yet to happen as the Biden administration has tied the removal to Iran suspending its uranium enrichment program.
Exports were also on the rise, oil minister Bijan Zanganeh said in January, noting, "I am not worried about regaining Iran's lost oil market share, and oil buyers do not limit themselves to one or two sellers." If the U.S. sanctions were lifted, he said, "We will return to the market stronger than before, sooner than you might think."
According to Reuters' Bozorgmehr Sharafedin and Roslan Khasawneh, Iran doesn't have much time to regain and boost its market share: most oil demand forecasts suggest the world's oil consumption will peak within the next couple of decades. This means Iran will need to quickly adjust to a world that needs a lot less oil but a lot more alternative energy sources, the Reuters authors said.
"The dominant narrative is still to keep production optimal long-term - without realising time is running short - and to avoid exporting oil as raw material - without appreciating the refining business may not be a profitable business in the long-term anyway," said Iman Nasseri from energy consultancy FGE, as quoted by Reuters.
Iran is among the top five oil producers in the world in terms of reserves and, according to the oil ministry, could ramp up production this year to between 3.9 and 4 million bpd.
By Charles Kennedy for Oilprice.com
More Top Reads From Oilprice.com:
Charles is a writer for Oilprice.com More
Comments
Reuters is suggesting that with US sanctions continuing, Iran may not have much time to expand its production capacity, increase its crude oil exports and boost its market share, hence having its massive oil assets stranded. The reasons are peak oil demand and US sanctions.
However, Reuters must be hallucinating if it believes that peak oil demand will be reached in the next couple of decades.
There will neither be a post-oil era nor peak oil demand either throughout the 21st century and probably far beyond for the simple reasons that oil is irreplaceable and the global economy will continue to run on oil and gas well into the future.
Iran has already mastered the art of nullifying and evading US sanctions and is already exporting an estimated 1.5 million barrels a day (mbd) or 71% of its pre-sanction crude oil exports with exports of its refined products breaking records.
One has also to consider the unthinkable eventuality that Iran might be happy by the level of success it has achieved so far against the sanctions. It might even think that the sanctions are a small price to pay for forcing the ejection of US military presence from Iraq and making Iraq a vassal of Iran thus achieving a spectacular geopolitical victory over the United States.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London