Investor caution may slow Iranian production growth, analyst claims

Offshore staff

FAVERSHAM, UK – Around one month after the lifting of EU and US nuclear sanctions on Iran, the country’s Energy Minister has called for $200 billion in international investment to modernize its oil infrastructure.

According to analyst Douglas-Westwood (DW), the removal of sanctions and discussions over a new, more flexible Iranian Petroleum Contract should provide incentives for international investors. Majors such as Total, ENI, and Repsol have already expressed interest in resuming business in the country.

However, should Iran succeed in adding 500,000 b/d to the crude markets, this could dent the analyst’s expectation of a slow-paced recovery in the oil price during the latter part of this year.

DW says it has a conservative view on the sustainability with which Iran can return significant additional volumes to the market, and there remains uncertainty over the timing, structure, and implementation of the new oil contract model.

In view of the level of investment needed, international parties will need clarity on the new Iranian operating environment before committing capital and resource. The continued risk attached to operating in Iran means that the sector will take time to attract the required support.

However, DW foresees upside potential for drilling and production over the next five years from Iranian projects that were stalled, delayed, or under-invested during the sanctions, with the offshore North Pars and Ferdowsi gas fields and the South Pars oil layer all likely to be tendered for international investment.

02/15/2016

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