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Page added on April 7, 2018

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Is The Iran Nuclear Deal Coming To An End?

Public Policy

As the U.S. moves closer to pulling out of the Iran nuclear deal and re-imposing sanctions, Iran could see some of the recent progress in its energy industry being rolled back.

The Iran nuclear deal in 2015 was an economic windfall to the country, removing international sanctions and opening up Iran to greater engagement with the rest of the world. Crucially, the deal promised to pave the way for more investment from international oil companies, something Iran desperately needed in order to develop new oil and gas fields.

Yet, some lingering sanctions and uncertainty from U.S. policy clouded the prospects of investment in Iran. Most western oil companies stayed away even after the nuclear accord was signed. Only French oil giant Total SA rolled the dice, signing a deal to develop the next phase of the massive South Pars gas field in the Persian Gulf, in partnership with China’s CNPC. It was the first oil agreement to be completed after the nuclear deal and the first under the Iran Petroleum Contract.

However, Iran had hoped to have made much more headway at this point. Several years on from the nuclear deal, much of the Iranian populace has grown impatient over the disappointing benefits stemming from the accord, which have fallen far short of its sky-high expectations.

Still, the past year saw some progress in Iran’s energy sector, according to a new report from the Oxford Institute for Energy Studies (OIES). First, Iran began exporting natural gas to Iraq. This was a milestone for both countries, offering Iran some export revenues and greater influence in Iraq. From Iraq’s standpoint, gas supplies could help cut down on blackouts and also free up crude oil for export.

Also, Iran claims that its gas output from South Pars has doubled in the past year, eliminating the need to import gas from Turkmenistan. Iran hopes to use these higher gas volumes to fuel a rise in its petrochemical industry.

Second, Iran inked two energy deals, including the aforementioned gas deal with Total and CNPC, plus a deal with Russian’s state-owned Zarubezhneft to develop two oil fields. While these deals were significant, leading to a “better-than-average” year for Iran’s energy sector, they do not amount to a major breakthrough that could significantly alter the trajectory of the country’s oil and gas export levels, at least not in the short-term.

Fears of U.S. sanctions have continued to scare away international banks from offering finance to Iran or other oil companies to develop projects in Iran. “A major – if not the greatest – obstacle to post-JCPOA investments in the Iranian economy is the lack of access to international finance,” OIES wrote. Total stands out as a unique case because it has a long history in Iran and is able to self-finance its natural gas project. In that sense, its decision to invest in the face of political risk was unique, and was not replicated by other companies.

Iranian officials have stated that they want to boost oil production capacity to 4.7 to 5.0 million barrels per day (mb/d) over four years, but for now, lacking much higher levels of investment and development from outside companies, that goal will likely remain out of reach. Iran was quickly able to add 1 mb/d after the removal of sanctions in early 2016, pushing production up just shy of 4 mb/d within a year. But absent much deeper levels of investment from outside oil companies, the country’s production capacity remains “stuck” there today, OIES says.

The modest progress from Iran’s perspective is now being threatened by the Trump administration, which appears likely to pull out of the nuclear accord when it comes up for review in May. The appointment of CIA Director Mike Pompeo to lead the State Department and John Bolton to take over as National Security Advisor – two belligerent hawks when it comes to Iran – will effectively scare away any potential investment in Iran’s oil sector.

Obviously, much of the focus from the oil market will be on the immediate impact to Iran’s oil supply. The OIES report predicts that the lack of cooperation from the EU in Washington’s quest to ratchet up tensions probably means that the withdrawal from the nuclear deal by the U.S. won’t “directly translate into bringing Iranian oil exports down dramatically.” A separate report from Columbia University’s Center on Global Energy Policy from March predicted that U.S. action to re-impose sanctions might knock 400,000 to 500,0000 bpd of Iranian oil offline within a year.

Either way, the hawkishness from Washington will almost certainly block the long-term investment that Iran had hoped to secure to boost oil and gas production beyond current levels. And it could even scare away Total’s planned investment, essentially putting a halt to the progress that Iran has made over the past year.

By Nick Cunningham of Oilprice.com

 



7 Comments on "Is The Iran Nuclear Deal Coming To An End?"

  1. twocats on Sat, 7th Apr 2018 7:25 am 

    nuts that the US still wields so much power even though headed by a total whack-job clown and a majority ruling party of equally insane ass-hats. i would love to listen to the private conversations of world leaders regarding this issue. I mean they must know the US is powned and that they’re taking everyone down with them, right?

  2. Davy on Sat, 7th Apr 2018 7:32 am 

    Come on Two Cats it is a little more complicated than that. This is how the world negotiates with other “pwned” countries. They are all up to no good and if you think the other side isn’t then you are being naive. I do agree the US is the most “pwned” but that does not mean it is a binary of good and bad like the anti-Americans want to present the situation.

  3. Anonymouse1 on Sat, 7th Apr 2018 2:15 pm 

    The so-called ‘Iran nuclear deal’, was never anything more than (illegal) uSraeli harassment and intimidation of Iran. Iran only went along with this intolerable uS interference in its sovereignty, in the hope it would provide it some relief from constant uS-raeli hectoring and harassment on the world stage.

    How is that working out for you Iran? The only take-away, for all the other nations and peoples of the world is this.

    Any ‘deal’ made by amerikans, or their masters, is not worth the paper it is printed on.

  4. Davy on Sat, 7th Apr 2018 2:55 pm 

    What’s with the goofy spelling stuff weasel? Is that a special anti-American dialect? Is it a secret Nazi sign you learned playing X-Box?

  5. Boat on Sat, 7th Apr 2018 4:44 pm 

    A mouse

    As long as Iran supports religious groups that randomly kill civilians around the world expect trouble from many of the rest of us.
    You peckerhead idiots like to single out the US as some kind of lone attacker while dozens of other nations take part in a group effort.
    Your sympathy warrants investigation as to terrorists links and funding. Your kind of free speech is a danger to the world.

  6. MASTERMIND on Sat, 7th Apr 2018 4:48 pm 

    Boat

    Just shut up! Iran produces the most scientific papers in the entire middle east by a long margin. Even more than Israel. And they have never tried to invade or go to war with any country. Even though several have tried attacking them. They have a democratically elected president. Unlike the Saudi dictators. The reason the US government and media hate them is because they are enemies of the Saudi’s and Israel.

  7. Boat on Sat, 7th Apr 2018 4:57 pm 

    Mm

    It’s religion vrs religion vrs religion. Screw religion. Keep the peace and oil flowing. Don’t fund killing or expect vto be killed for the greater good of the world. NWO Act like Sweden. Lol

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