Although uncertainty persists over whether oil sanctions on Iran will be lifted, we have built several scenarios for possible crude supply paths over the next ten years (see Asian Oil Markets, Issue 23 – 15 June 2015).
- Our base case scenario assumes that the deal between Tehran and P5+1 group of countries will be finalised this year but that sanctions are only likely to be partially lifted starting from 2016. As a result, we see foreign investment in the country occurring gradually over the next few years, meaning that the bulk of the impact will only be felt at a later stage, with Iranian output reaching almost 3.5 million b/d by 2025.
- We tend towards a conservative estimate in terms of production additions due to the natural decline rates in crude output. Under an annual 2% decline scenario for the sanctions years, the potential for new output within the first year after the sanctions are removed is a conservative 300,000 b/d. This figure assumes that more oil was being produced and exported than actually been reported.
- In terms of exports, we could see an increase of over 600,000 b/d in the first quarter following the total removal of sanctions. This comes on the back of reclassification of the sanctions-busting barrels as well as Iran deciding to draw down sizable volumes from floating storages, which we estimate to be holding 36 million barrels at the Persian Gulf.