The re-emergence of Iran as a full player in the global oil and gas market is a major development and would be so under any market conditions. In the current environment, the collapse of oil prices accentuates concern over market stability, the prospects for price recovery, and the implications of both issues for the global financial system. While the concerns are justified, the most important global dimensions of Iran’s return to the market have to do with the country’s long-term oil and gas potential.
The recently implemented Joint Comprehensive Plan of Action (JCPOA), which is agreed to by China, France, Germany, Russia, the United Kingdom, the United States, the European Union, and Iran, lifts nuclear-related sanctions against Iran to restore the country’s access to world oil and gas markets and its freedom to seek international investment in its industry.
Imposed in December 2011 and the first half of 2012 in connection with Iranian nuclear activity, the sanctions placed restrictions on Iran’s central bank, Iranian imports, and the country’s access to international shipping insurance.
As the sanctions took hold, Iran’s production of crude oil and noncrude liquids fell from 4.4 million B/D in 2011 to an average of 3.6 million B/D over the next 3 years. Crude oil production, which excludes noncrude liquids, fell from a previous 3.7 million B/D to an average of 2.8 million B/D under the sanctions. Crude oil exports were cut in half, falling from 2.2 million B/D to 1.1 million B/D. Many oil fields and wells had to be shut in. Development projects were halted or seriously delayed, and the financial consequences of the restrictions that stemmed from the sanctions cascaded through the Iranian economy.
Re-Emergent Iran Brings Large Potential
Joel Parshall, JPT Features Editor
13 May 2016