Iran will benefit enormously from the removal of the sanctions, it will have full access to its frozen petro-dollars, it will be able to export as much Crude Oil as it wants; and international Oil companies will be able to work in the country.
Internationally, the biggest impact will be on Crude Oil prices.
There is no indication yet that Key OPEC producers Saudi Arabia and the Gulf countries will pare output to accommodate Iran’s increased production.
Barring supply outages, OPEC action to reduce production, or an increase in demand, there is the likelihood that Iran’s additional barrels will flow onto a volatile, glutted market.
Asia has seen increased volumes of Russia’s Crude Oil, and has been a destination for additional barrels from Iraq, which is exporting record volumes of Crude Oil.
But this is not an OPEC-Vs-non-OPEC story. Within OPEC there is an intense struggle for market share happening ahead of Iran’s full return to the market.
The Big Q: The pace at which Iran can boost production and exports?
The International Energy Agency (IEA) in August said that Iran’s Oil fields are estimated to be capable of ramping up production to 3.4-3.6-M BPD quickly after sanctions are removed.
Iran has built up its stocks of Oil on tankers in the Persian Gulf and the IEA estimated the end-July volume at 50-M+ bbls.
The IEA said: “while significantly higher production is unlikely before next year, oil held in floating storage — at the highest level since sanctions were tightened in mid-2012 — could start to reach international markets before then.”
The US EIA sees the 1st impact on markets coming from the release of the tankered inventory. Stored volumes could boost total world supply by about 100,000 BPD the end of Y 2015.
The EIA is the statistics arm of the US Department of Energy, and it estimates that Iran has the technical capability to increase Crude Oil production by about 600,000 BPD by the end of Y 2016, with most of this increase occurring in 2-H of Y 2016.
On 23 August, Iranian oil minister Bijan Zanganeh said he supported the idea of an emergency OPEC meeting to discuss how the oil producer group might respond to the latest Oil price dive that has seen Crude Oil prices fall to 6 year lows.
An extraordinary meeting of OPEC is being called for before December. But that requires the backing of Saudi Arabia and there has been no sign that the Kingdom, which argued last November that cutting Crude Oil output would not halt the price fall but would further reduce OPEC’s share of world markets, may be willing to back an emergency meeting.
Saudi Arabian Oil minister Ali Naimi has not spoken publicly about Crude Oil prices since June, when, with prices some $20 bbl higher than they are now, he said the market was moving in the right direction.
The US EIA expects the biggest non-OPEC declines to occur beyond Y 2016 as capital spending cuts hit US conventional projects with longer investment horizons.
CAPEX cuts are most likely to affect producers in areas outside the shale Oil plays in the US, it said in its August Outlook.
Iran will unveil its new Integrated Petroleum Contract at a 14-16 December roadshow in London. This will replace the current contract, known as the buyback because investors were paid from project revenues and which has long been criticized as providing little incentive for international oil companies to invest.
The buyback has been cited as having had as much of a role in dampening Oil company enthusiasm for Iranian projects over the years as the political pressure from the United States.
The new model has not been seen in its entirety, but Iranian officials say its provisions will include longer-term involvement of contractors and adjusted interest rates in accordance with risks as well as financial transparency.
At a Vienna trade conference shortly after the nuclear deal was signed, Iran’s deputy Oil minister for international and commercial affairs, Amir Hossein Zamaninia, said Tehran had identified nearly 50 projects worth some $185-B that would be up for bids between now and Y 2020.
Iran has been talking to international Oil firms for some time.
Since mid-July, several high-ranking political and trade delegations, including those from Britain, France, Germany, Italy, Japan and South Korea have visited Iran for talks with government officials and the private sector on possible future business co-operations.