Post-JCPOA Iran Oil Exports
One year has passed since Iran and six world powers struck a landmark nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). The historic agreement, which took effect in January, was the most important international development pertaining to Iran’s petroleum industry because Iran’s oil sector was at the receiving end of international restrictions. Now that the sanctions have been lifted Iran has brought its oil exports rate back to the pre-sanctions levels and is still determined to raise its output in coming years.
After the moderate administration of President Hassan Rouhani took office in 2013, a fresh round of nuclear talks were launched with the objective of overcoming disputes between Iran and P5+1 – the United States, France, Britain, China, Russia and Germany.
Ever since the agreement was signed, multinational and international companies have been expressing their interest in investing in Iran’s oil and gas sector. According to Iranian officials, the country’s petroleum industry will need $130 billion to $140 billion by 2020. The offshore South Pars gas field will need $30 billion. The World Bank has estimated that Iran will need $3 billion to $3.5 billion in foreign investment in 2016 and 2017, which requires a 5.5% growth in foreign investment attraction next year.
Regaining Iran Share
Immediately after international sanctions were lifted on Iran, the country restarted negotiations to win back its traditional customers in Europe and managed to gird many of them for resuming purchase of Iran’s crude oil.
France’s giant Total signed a contract for buying 160,000 b/d of crude oil from Iran. Oil is being loaded on tankers to depart for the terminals of this company. Furthermore, negotiations were held with Russia’s Lukoil and Spain’s Cepsa, ending in the signature of agreements. Greece’s Hellenic Petroleum also started receiving Iran’s crude oil.
For their part, Chinese, Indian, South Korean and Japanese companies have requested an increase in their oil purchase from Iran. Japan has already increased its Iran’s oil imports.
Iran’s Minister of Petroleum Bijan Zangeneh recently announced that the country’s oil production had exceeded 3.8 mb/d in the first quarter of the current calendar year (which started on March 20). Iran’s oil exports in the first quarter went beyond 2 mb/d.
According to Zangeneh, Iran’s petrochemical production stood at 40 million tons and petrochemical exports reached 12.8 million tons in March 2013. But, he noted, these figures reached 46 million tons and 18.7 million tons respectively in the last calendar year.
Iran is estimated to reap $21billion from oil exports this year if the country’s export averages 1.7 mb/d.
Iran’s pre-JCPOA and post-JCPOA oil revenues are significantly different. For instance, Iran’s light crude oil earned the country $21 million a day, which soared past $36 million after the JCPOA was implemented. Iran’s crude oil income in April alone was more than $13 billion, up from $7.6 billion before the sanctions were lifted.
Iran shipped 2.3 million b/d in April 2016, the highest level since 2012. These figures are 15 percent higher than the International Energy Agency (IEA) forecast. So far, Iran has been successful in its strategy, but increasing its market share further might prove difficult.
Iran's oil exports were set to surge in May, climbing nearly 60 percent from a year ago, with European shipments recovering to about half of pre-sanction levels, according to a source with knowledge of the country's crude lifting plans.
This shows Tehran is regaining market share at a faster pace than analysts had projected as it battles with Saudi Arabia for customers by cutting its prices. May shipments are set to jump to 2.1 mb/d from 1.3 mb/d during the same month in 2015, when Iranian exports were constrained by Western sanctions imposed because of the country's nuclear program. The April loadings were the highest since January 2012.
The increase in loadings suggests that Iran has overcome a tanker shortage that threatened to derail attempts to regain market share after the sanctions were lifted in January.
Loadings to Asia were 1.7 mb/d in April, about a third higher than a year ago and the most since 2011, according to Reuters.
Loadings were to stay near that level for May, with 1.6 mb/d scheduled.
Loadings for China, Iran's biggest customer, were nearly 840,000 b/d in April and more than 620,000 b/d were planned for May.
Iran's sales to Europe, including Turkey, are also rising fast, according to the Reuters source. April loadings to Europe totaled 487,000 bpd and are set for 400,000 b/d in May. European countries were buying as much as 800,000 b/d before 2012.
Oil major Total SA was set to take 160,000 b/d of crude in May, down from the 240,000 b/d loaded in April. The company, along with Spain's Cepsa, signed import deals with National Iranian Oil Company (NIOC) after the sanctions were lifted in January.
Loadings to Spain were set for 32,000 b/d in May, while Greece would take 65,000 b/d.