Sanctions could hit Iranian oil output

10 January 2012

Measures could lead to drop in infrastructure spending and cause production to plummet below 3 million barrels a day

Iran’s oil production could fall to under 3 million barrels a day (b/d) within the next two years if major rehabilitation work is not carried out to the country’s hydrocarbon infrastructure.

US sanctions on the Central Bank of Iran and an embargo on Iranian oil will start to take effect in 2012. As a result, the pessimistic view formed in 2011 in Tehran of production dropping below 3 million b/d by 2015 could happen sooner. Tehran has stated current production is about 3.7 million b/d.

“The sanctions are going to mean Tehran will be short of cash … this, in turn, could adversely affect any investment [in the oil industry],” says Samuel Ciszuk, a London-based energy consultant with KBC.”We estimate Iran’s production to be about 3.6 million b/d at the moment.”

Much of Iran’s oil infrastructure is in dire need of major refurbishment. Many of its fields now require secondary-level enhanced oil recovery (EOR) techniques currently unavailable in the Islamic Republic.

Iran is searching for new customers to buy its oil, but many countries do not want to jeopardise exports to the US that may be affected if they conduct any financial transaction with Iran’s central bank. The new harsher sanctions have been imposed by the US and its allies to try to stop further development of Iran’s nuclear programme.

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