After the "Geneva agreement" on Iran's nuclear program, speculations
about reviving Iran's halved crude oil export to international markets
The Middle East country's crude oil export decreased from 2.2 million
barrels per day to below one mbpd since 2011, while condensate export
dropped by 34 percent to about 200 tbpd during the mentioned period.
The latest report published by Iran's Custom Administration says the
country's condensate export soared to 345 tmbd during last Iranian
calendar month (Oct.21 to Nov.22), even more than pre-sanctions' level,
but what about crude oil? First of all, let's review what mechanisms
were used by Iran toward the West's sanctions, aimed at chocking up the
country's oil exports.
Iran was unable to boost refinery capacity, so it was forced to start
closing down some oil wells as well as storing crude oil in tankers.
Reportedly, Iran holds 25 to 30 million barrels of unsold oil storage in
tankers, potentially is able to be supplied whenever other restrictions
Iran also is able to re-open closed oil wells in 3 to 6 months and boost
oil output by 0.8-1 mbpd from current level which is about 2.6 mpbd
based on IEA and OPEC's estimations.
Potential doesn't equal reality
International Energy Agency and OPEC, as the representatives of energy
importers and suppliers respectively, both predicted that the
international demands for oil in 2014 would rise by about one mbpd, but
not from which of OPEC members produce.
The OPEC's current oil output ceiling is about 30 mbpd, while Libya's
producing 30 percent of its real capacity and Iraq's oil output
decreased by about 0.2 mbpd in October compared to August due to
temporary disruptions. However, OPEC says the demand for OPEC crude
would decrease from current 29.9 mbpd to 29.6 mbpd next year.
Of course, the U.S. - thanks to the technology of producing oil and gas
locked in shale rock - is going to boost their oil output significantly.
It's predicted the U.S. would overtake the Saudi Arabia's output level
until 2015, but regarding to American shale oil's type which is sweet
and light, it is not a serious direct rival for Iranian heavy and mostly
medium oil (in the 28° to 35° API gravity range) in international
Today, 164th OPEC petroleum ministers gathered in Vienna to discuss the
cartel's output, but considering the instability in Iraq and Libya, and
also significant lack between ceiling level and the current supply, it
is predicted that the ceiling level will not be changed.
Iraq and Russian oil factor
It seems - in case the oil export-related sanctions over Tehran are
eliminated this month - Iran would face some major obstacles to
re-opening its closed oil wells.
The first one is Iran's stored oil in tankers and decrease of markets'
demand to OPEC oil. With keeping the current output level and
considering the fact that the West eased some restrictive financial
measures on Iran, but had not eliminated sanctions on the country's oil
export, Iran actually will be unable to re-open any oil wells until the
third quarter of 2014 and boost production level, or even early 2015
regarding unsold oil amount in tankers.
IEA says that within several years the demand for OPEC's crude will
increase, and Iraq with an oil type so close to Iran's crude type in
term of API gravity.
Iraq has aimed at having a daily12-million barrel production level 2017.
This figure seems ambitious - especially due to ongoing instability and
lack of security inside the country- but regarding huge contracts with
international giant oil companies, Iraq certainly will be able to
significantly raise crude production.
The other oil, close to Iran's in quality is Russian Ural crude, with
API gravity of about 31.3 and containing about 1.25 percent of sulphur,
the best possible replacement for Iranian oil. Russia's Ural crude has
already compensated for the cut Iranian oil flow to European refineries
Urals blend accounts for more than 80 percent of Russia's exports and is
a mixture of mostly Russian crude varieties, according to the Energy
Information Administration's latest report.
The situation became worse for Iran when Russian Energy Ministry
announced on Dec.2 that increased production at Rosneft and foreign-led
projects sent overall Russian oil output, the world's largest, to a
post-Soviet record high of 10.61 million barrels per day in November
Dalga Khatinoglu /Trend/