Iran's adherence to the 2015 nuclear deal, and subsequent lifting of US sanctions, led to a boom in Iran's energy sector. A similar boom is expected if a new deal is successfully agreed as a result of the ongoing negotiations in Vienna involving Iran, the US and other global powers. Experts suggest that the Iranian return to a deal could entail both negative and positive scenarios for its energy economy.
The production of oil following the 2015 agreement increased to 4 million barrels and exports to more than 2 million barrels per day, but these figures quickly declined after the US withdrew from the agreement in 2018. Now, Iran is once again officially expected to return to the global energy market.
An Iranian oil and energy expert, Hamid Reza Shokoohi says that Iran could expect a quick return to the oil markets due to the experience of the oil minister and his knowledge of the global markets. However, one problem is the current surplus in production and low demand on the global level in the past year. This hinders countries that have moved away from the Iranian market to return to their former level of demand. Former Iranian oil importers have also become pessimistic and sceptical of continued dependence on Iranian oil, due to repeated sanctions on Tehran.
Therefore, Iran is excepted to return gradually to the oil market, and will not witness the rapid progress it achieved in 2015. However it is expected that Iran could add at least 1 million barrels to its current exports and eventually increase its daily production to 4 million barrels per day, according to Shokoohi.
Nonetheless, Iran has followed an informal export approach in which exported quantities have not been part of official statistics. A number of international institutions and experts believe that Iran's oil exports have never hit the zero mark after the reinstatement of sanctions, but have ranged between 300,000 to 500,000 barrels per day, and those figures have gradually increased as Iran found ways to export its oil despite the sanctions. According to an International Energy Agency report in March, Iran's oil production reached 2.3 million barrels per day.
This informal export mechanism was possible due to additional discounts that Iran offered, but Iran will most likely get rid of the discounts if sanctions are lifted. Higher profits and higher prices are two consequences if Iran cancels the additional discounts.
Source: commonspace.eu with Al Jazeera (Doha).
Picture: View from the Parsian Sepehr Refinery in Iran. (Twitter: @VezaratNaft).