To the surprise of many outsiders, Iranian oil production has roared back since the easing of international sanctions in January.
According to the International Energy Agency, Iranian output climbed through the presanctions level of 3.6 million b/d by May and reached a monthly average of 3.72 million b/d in November.
Sanctions imposed in 2012 had cut output by 1 million b/d.
The comeback refutes earlier doubts that the Islamic Republic could sustain a production increase once floating storage was exhausted.
In fact, says a research note from Arab Petroleum Investment Corp. (APICORP), Iran had been preparing oil fields for the end of sanctions since mid-2013.
With help from China National Petroleum Corp. and Sinopec Group, National Iranian Oil Co. has been refurbishing and debottlenecking production equipment and drilling and working over wells.
As expected, the first Iranian supply surge came from limited onshore storage and tankers, which held more than 40 million bbl at the of 2015, according to APICORP.
But production has risen since January, too. About 250,000 b/d is from new fields in the West Karun region. One of those fields, South Azadegan, was on early production before sanctions ended. Output from Azar field increased to 67,000 b/d from 27,000 b/d.
Most of the post-sanctions increase occurred in mature fields operated by NIOC—such as Marun, Gachsaran, and Ahwaz—which absorbed most of the cuts and represented 75% of Iran’s presanction capacity.
APICORP says Iran has recaptured much of the market share it lost in Europe and has increased exports to Asia. While sanctions were in place, Iranian oil went mainly to China, India, Japan, and South Korea.
APICORP thinks Iran, with mature-field decline rates of 6-12%, has reached near-term production limits.
In the medium term, however, capacity will increase in West Karun fields such as Yadavaran, North and South Azadegan, and North and South Yaran.
But reaching Iran’s production target of 5 million b/d requires foreign investment and technology.
“Favorable terms under the [new] international petroleum contract and Iran’s ability to assure a stable political landscape,” APICORP says, “will both be necessary for further capacity growth.”
(From the subscription area of www.ogj.com, posted Dec. 16, 2016; author’s e-mail: [email protected])