Iranian oil production could increase by 400k b/d during 2016

Iranian oil production could increase by 400k b/d during 2016

A new report by Apicorp suggests that Iran could increase its oil production by 400,000 b/d by the end of 2016 and at least another 300,000 by the end of 2017. Iranian oil production is currently 2.8 mn b/d.

The Apicorp economists identify three sources of increased Iranian oil production in a post-sanctions era: emptying storage, restoring production in old fields and bringing new fields on stream.

Emptying storage: If Iran is to pump and export higher volumes it will need to empty the tankers that it has been using to store oil. In mid-2015, Iran had 40 million barrells in such storage, equivalent to 220,000 b/d of exports for six months. However, the report says that much of the stored oil may be condensate, which can be hard to sell, so the actual rate at which storage is emptied could be lower.

Restoring production in old fields: In a post-sanctions era, Iran will have the capacity to increase the production rates of its mature on shore fields, which accounted for three quarters of pre-sanctions era capacity. The biggest such field is Ahwaz, which the report says could recover its pre-sanctions production of 800,000 b/d (compared to 560,000 in mid 2015) within 18 months.

Bringing new oil field on stream: There is great potential to increase production of new on shore fields, although implementation will depend on the return of International Oil Companies that have significant technical and financial resources.

In summary, storage releases and additional production from major fields could deliver an additional 400,000 b/d over 12 months. Incremental production at newer fields could yield 150,000 b/d. However, production declines (for example, in older fields that are not being refurbished) will reduce the net increase to about 400,000 b/d by the end of2016. As new projects ramp up, incremental production in 2017 could be 300,000, under Apicorp's low case scenario.

The Apicorp report is three pages long, clearly argued, and easy to read. It is attached here. 

 

Iran oil post sanctions_APICORP