WASHINGTON, D.C. – The US Energy Information Administration (EIA) has released a report discussing Iran’s production, including the South Pars gas field development, following the recent decision to lift sanctions against the country.
On Jan. 16, the Joint Comprehensive Plan of Action, an agreement among Iran, the five permanent members of the United Nations Security Council and Germany (P5+1), and the European Union, was implemented when the International Atomic Energy Agency verified that Iran had completed the key physical steps required to trigger sanctions relief. As a result, the US, EU, and United Nations have lifted nuclear-related sanctions against Iran, which include oil-related sanctions that have limited the country’s ability to sell its oil on the global market since late 2011.
Sanctions relief will lead to an increase in Iran’s oil production and exports, which had been subject to an EU embargo among other sanctions.
According to the EIA, Iran’s crude oil production averaged 2.8 MMb/d in 2015, representing 9% of total crude oil production from OPEC. In its January Short-Term Energy Outlook (STEO), which assumed implementation day to occur this quarter, the country’s annual average crude oil production is forecast at 3.1 MMb/d in 2016 (10% of projected total OPEC production), and almost 3.6 MMb/d in 2017.
Consistent with these forecasts for average annual production, Iran’s crude oil production reaches 3.3 MMb/d at the end of 2016 and 3.7 MMb/d at the end of 2017. EIA estimates a subjective uncertainty range of +/- 250,000 b/d surrounding these year-end projections, with actual outcomes dependent on Iran’s ability to mitigate production decline rates, deal with technical challenges, and bring new oil fields into production.
Most of the country’s forecast production growth comes from its preexisting crude oil production capacity that is currently shut in, while the remainder comes from newly developed fields. Iran has a number of new oil fields that Iranian and Chinese companies have been developing over the past several years, which have the potential to add 100,000 b/d to 200,000 b/d of crude oil production capacity by 2017. The STEO forecast also accounts for production declines at its mature oil fields.
Beyond crude oil, the country’s condensate and natural gas plant liquids (NGPL) production is currently almost 750,000 b/d, of which 75% is condensate and the remainder NGPL. Iran’s non-crude liquids production has grown over the past few years. The main buyers of Iran’s non-crude liquids have been in countries in Asia, mainly China, and the United Arab Emirates.
According to the report, Iran’s non-crude liquids production is expected to grow by 150,000 b/d by the end of 2016 and by an additional 100,000 b/d by the end of 2017, as more project phases at the South Pars natural gas field come online. More than 80% of Iran’s condensate production comes from the offshore South Pars field in the Persian Gulf, which is the country’s largest non-associated gas field.
Lack of foreign investment and insufficient financing, stemming from international sanctions, have slowed the development of South Pars. However, some progress has been made in recent years, and sanctions relief is expected to quicken the pace of development of its remaining phases over the next decade.
According to the EIA, the pace that Iran will ramp up its exports now that sanctions are lifted is uncertain. The country has between 30 and 50 MMbbl of oil stored offshore in tankers, most of which is condensate, and crude oil stored at onshore facilities. Initial post-sanction increases in Iranian exports will most likely come from storage, while meaningful production increases will occur after some of the storage is cleared.