Iran Unleashes Oil Flood, Will Quintuple Crude Revenue In 2016
On Saturday, Iran marked what President Hassan Rouhani called a “golden page” in the country’s history when the IAEA ruled that Tehran had stuck to its commitments under last year’s nuclear accord.
Moments after the ruling was handed down, the US and the EU each lifted nuclear-related financial and economic sanctions on the “pariah state,” much to the chagrin of Israel and Tehran’s regional rivals who view the West’s rapprochement with the Iranians with deep suspicion.
"Everybody is happy except the Zionists, the warmongers who are fuelling sectarian war among the Islamic nation, and the hardliners in the U.S. congress,” Rouhani said, referring directly to Israel, the Saudis, and GOP lawmakers in the US.
In addition to the never-ending feud with the Israelis, Tehran is embroiled in a worsening conflict with Riyadh triggered by Saudi Arabia’s execution of prominent Shiite cleric Nimr al-Nimr and subsequent attacks on the Saudi embassy and consulate in Iran. The argument has raised the specter of an all-out conflict between the Sunni and Shiite powers and stoked sectarian discord across the region.
With sanctions lifted, Iran will now have access to some $100 billion in frozen funds and will be able to increase its oil revenue exponentially even as prices remain suppressed.
It’s easy to see why the Saudis and other Gulf Sunni monarchies are nervous. Iran plans to immediately boost output by 500,000 b/d with an additional 500,000 b/d coming online by year end. “The oil ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran’s crude exports by 500,000 barrels,” the official Islamic Republic News Agency reported on Sunday, citing Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs.
“Iran could haul in more than five times as much cash from oil sales by year-end as the lifting of economic sanctions frees the OPEC member to boost crude exports and attract foreign investment needed to rebuild its energy industry,” Bloomberg reports, adding that “the lifting of sanctions means Iran can immediately boost oil revenue to about $2.35 billion a month, based on the country’s estimated current output of 2.7 million barrels a day and oil at $29 a barrel.”
Even if oil hovers between $30 and $35 a barrel, Iran will be pulling in some $3 billion a month by summer and nearly $4 billion a month by December.
"Iran's aging oil fields may present some challenges to the pace at
which it can physically raise production," Deutsche Bank wrote last year, as prior to the signing of the accord. Here's a bit more color:
Changes to Iran's sustainable production capacity in the medium term will likely depend partly on the speed and extent to which international oil companies (IOCs) invest in the development of Iran’s oil resources. Currently, 38% of Iran's oil production originates from three large fields and associated areas which began production decades ago (Gachsaran 1934, Ahwaz 1959, Marun 1965). Of the original resource contained in these three "super-giant" fields, only 23% remains now.
Further development drilling will likely be required in order to maintain production, and secondary techniques such as CO2 or associated gas injection may be required to improve the recovery rate and counteract falling reservoir pressure. Prospects for higher production would be improved by IOC participation. However, foreign investment has lagged not only because of sanctions, but also because of the government's buyback agreements which are considered unattractive.
On Sunday, Rouhani said the country needs between $30 and $50 billion in foreign investment in order for the country to hit its 8% growth target for the year. "Untapped potential in many industries indicates that domestic demand cannot solely push the economy toward eight per cent growth," he said. "Attracting foreign investment will be the best way of using the opportunity of sanctions relief to boost the economy and security."
But according to Israel, it's all a charade. On Saturday, The Times of Israel said that according to an unnamed "source in Jerusalem", the first thing Iran will do is send money to Hezbollah. "The implementation of the agreement would have a direct impact on the region, as terror groups Hezbollah and Hamas — both recipients of Iranian largesse — found themselves in possession of new and modern weaponry," The Times wrote. A statement from PM Netanyahu's office reads: "Even after the signing of the nuclear agreement, Iran has not abandoned its aspirations to acquire nuclear weapons, and continues to act to destabilize the Middle East and spread terrorism throughout the world while violating its international commitments."
We wonder whether Netanyahu would say the same thing about the Riyadh, where "acting to destabilize the Mid-East and spread terror throughout the world" is an explicit foreign policy aim.
In any event, Iran just got a $100 billion windfall and will be around $2 billion richer each month by the end of the year. The return of Iranian supply "will have an immediate impact in the spot market” Robin Mills, CEO of consultant Qamar Energy, told Bloomberg by phone. “Putting oil in the market is going to push it down." "Iran’s additional crude shipments have the potential to further depress prices, perhaps to as low as $25 a barrel,” Nomura's Gordon Kwan added on Sunday.
As for what effect a richer, more prosperous Iran will have on regional stability, we'd suggest that anything that serves to counter Saudi influence is probably conducive to a more secure environment. Besides, things can't get much worse in the Mid-East, so it's hard to see the downside.
Implementing #JCPOA not a detriment to any country. Our friends are happy & our rivals need not worry. We're no threat to any nation/state.
— Hassan Rouhani (@HassanRouhani) January 17, 2016
(17 votes)
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If you spent more time online doing your job and less time spamming your ripoff site, your paycheck next week would be bigger still.
Whodafuck ups this shit asides from the OP?
This slow moving tsunami is picking up steam it seems. Next stop....Europe.....and then us. Should be an interesting open tommorrow.
We have to wait until Tuesday, that extra 24 hours, anything can happen.
<smack>........riiight......I forgot.......MLK Day.
Does that make me rayciss ?
That's not how it works. You are rayciss until proven otherwise. Have you seen any spike lee/oprah movies lately?
I try....really....really.....hard not to.
Totally rayciss ;-)
And while we're at it...
"...referring directly to Israel, the Saudis, and (GOP lawmakers) NEOCONS in the US."
Could we please maintain a distinction b/t neocons & the rest of the GOP, please. Not that the rest of the GOP is blameless/ideal, but isolating neocons might help in the effort to push them out of the tent and into the wilderness, where they we most certainly be eaten alive by rabbits with big, sharp teeth.
Unfortunately, there are none of "those Republicans" left in the GOP. And the few who have traditional GOP beliefs are totally marginialized. Back in the day the GOP stood for fiscal conservatism, Main Street business, small-efficient gov't and staying out of peoples private lives. In other words Libertarians. The GOP was hijacked by neo-bolshevik-cons. And are totally co-opted by ZWO.
The Democrat and Republican Parties are two sides of the same coin. The only rational response for the former GOP non-neocon faithful is to stop voting except local elections. Cause you really don't wanna feel connected nor responsible for the shit they'll enable once in office. They're ALL owned by the same cartel. Sorry.
More likely $10.00 oil.
....and starts WW3!
allah hu fuckbar
Here's the up-side, round trip ticket to West Africa less than a $1000 bucks!!
And if pricey oil isn't soaking up all those Petrodollars, then what will?
In this scenario, you'd think that the Dollar would be weak, not strong. More Fed and FX voodoo.
The spice, the worms, there is a relationship!
The spice must flow.
Apropo of nothing whatsoever, I am amazed, given the somewhat geeky bent of many posters on ZH, that nobody has assumed the moniker "Kwisatz Haderach". I just checked. One who sees the future, and who knows of the Golden Path, would seem to be a natural choice.
I'm amazed at the number of ZH members who are familiar with Frank Herbert's work, even with the hack-job movies made on the original novel...
JRobby, spice is worm shit!
Oil is drawn from tombs.
Your point?
Apropos for America......
"We came from Caladan--a paradise world for our form of life. There was no need on Caladan to build a physical paradise of the mind--we could see the actuality all around us.
And the price we paid was the price men have always paid for achieving a paradise in this life--we went soft, we lost our edge."
--From "Muad'Dib: Conversations"
By The Princess Irulan
There are those that make it happen, those that watch it happen, and those that wonder what happened.
Not too many left in that first group.
Who downvotes Dune/Herbert references??
Tough crowd in here today...
off topic
If you had read Dune you might not think so.
Who cares, it makes the space navs so high they can warp across spacetime.
We read them before the "hack job" movie came out.
I actually enjoy watching Lynch's Dune... it's campy, yet there is real tension throughout. And even the haters have to admit that there are some wicked good moments/performances... The Baron? great stuff.
Let's face it, Dune is impossible to squeeze into a single 2 hr. movie. Given the contraints, I think Lynch did a decent job there.
The mini-series of Dune Messiah and Children of Dune is quite good.
I agree. Every attempt to film Dune would be a hack to a certain extent. But the Sci Fi Channel ( not SyFy of Sharknado fame ) actually did rather well, for the budget and technology constraints of that era.
Hmm, I haven't seen the SFC miniseries. I'll have to check that out...
"Apropo of nothing whatsoever, I am amazed, given the somewhat geeky bent of many posters on ZH, that nobody has assumed the moniker "Kwisatz Haderach". I just checked. One who sees the future, and who knows of the Golden Path, would seem to be a natural choice."
** ahem ** Obviously you have not read the tomes, Kickaha.
Muad'Dib could indeed see the Future, but you must understand the limits of this power. Think of sight. You have eyes, yet cannot see without light.
If you are on the floor of a valley, you cannot see beyond your valley. Just so, Muad'Dib could not always choose to look across the mysterious terrain.
He tells us that a single obscure decision of prophecy, perhaps the choice of one word or another, could change the entire aspect of the future.
He tells us "The vision of time is broad, but when you pass through it, time becomes a narrow door."
And always, he fought the temptation to choose a clear, safe course, warning "That path leads ever down into stagnation."
--From "Arrakis Awakening"
By The Princess Irulan
Apropos for the Tylers and all good ZeroHedgers........
There should be a science of discontent. People need hard times and oppression to develop psychic muscles.
--From "Collected Sayings Of Muad'Dib"
By The Princess Irulan
Apropos for Today.......
"Control the coinage and the courts--let the rabble have the rest." Thus the Padishah Emporor advised you.
And he tells you: "If you want profits, you must rule."
There is truth in these words, but I ask myself: "Who are the rabble and who are the ruled?"
--Muad'Dib's Secret Message To The Landsraad
From "Arrakis Awakening"
By The Princess Irulan
Ahhh....I see we have a fan of J.J. Abrams in the house downvoting me.
Don't worry, little J.J. Abrams fan. I'm sure the Hollyweird task masters will give J.J. the greenlight to do a Dune Reboot. Can't wait to see shakey cam and lens flares all over the Sand Worms of Arrakis. With "frikin lazerrrs."
God I hope you are wrong.
With Disney-marketed gummy sandworms and costumes for the kiddies.
LOL !!! Gummy Sandworms......I think you just gave me a business idea. ; )
Read Dune the year it came out in paperback. I still have that copy, with it crinkled cover and fragile, yellowed pages. Read some of the sequels, maybe up through God Emporer of Dune. I fully understand that despite the triggering of his astounding genetically implanted gifts, things did not turn out well for Paul M'uad Dib. The original was a great book in considerable part because of the readily-drawn analogy of spice to oil. The sequels were interesting in their exploration into the difficulties of making one of the many threads of the foreseen future actually come to pass, but eventually I got the feeling that Herbert, his family, or his estate, were simply churning the franchise as best they could to make some money.
I agree......Herbert jumped the Sand Worm after the second one IMHO.
You should read the first six books in the series (those are the only ones written by Frank Herbert himself). The rest are abominations.
I've read them all. I read the original in hardcover in the third grade ( 1973 ) and bought the original collection when they came out in paperback. Bought the rest by his son....well...his son and Kevin J. Anderson..... at used book stores or garage sales. I wasn't going to pay good money for those. Glad I didn't.
I still think Frank was beginning to strain at world building after the second novel "Dune Messiah'. Although they all beat the crap out of a lot of the dreck that passes for Science Fiction today. But the first two were the best.
Of course if you read the books you would know that Paul Muadib went blind physically and wandered off intot he desert to die, thus leading to the 2000 year reign of his worm-son Leto the god emperor. So the whole kwisatz haderach bizness basically stopped after the 2nd book.
If you have kept up his son co-wrote a ton of books like 17 prequels and sequels, all of which are very good imho. Spoiler:end of the series gets wrapped around to Asimovs Erasmus.
One would hope this signals a long-term pivot away from the Saudis and Wahhabists in U.S. middle-eastern policy.
The most of the worlds population would rather see the USA go down in flames with the Saudis.
Sycophants are always the first to turn their backs, and allies by threat are even quicker. A whiff of weakness is all it will take.
Everything hinges on Iran selling oil in or out of the petrodollar.
Long - Russian high tech military equipment makers!
It must be true that Saudi reserves are much lower than previously thought.
"You're out, he's in. It's not personal, it's just business."
I would lol if the Saudi's have been pumping feverishly thinking they had decades of oil left and instead pumped themselves into oblivion by trusting US based geologists and oil experts.
Notice that Iran peaked in 2005 (before the sanctions). If you extrapolate that overall production curve down to today, it means that their capacity is likely only 3 million per day of which the majority of it will be consumed internally. I don't think they have the capacity to export much more than they already have been under sanctions. Of course, the story will still be used to allow those shorting the oil and commodity market to continue to profit, but eventually the reality of the supply demand curve will show up and, when it does, it will result in one of the fastests rises in oil prices in history.
My understanding is that Iran doesn't have the capability to refine and uses other sources for energy.
Releasing several billion in previously frozen assets might change that? Obviously if the price is going to stay very low, only low cost extraction makes sense (in Iran anyway....)
Your theory would be correct except for the fact that oil production was already declining before the sanctions were implemented. Also, who is going to even have the CAPEX availalbe with oil prices being kept so artifically low? There will be VERY little real impact from Iran.
We are already starting to see relatively large drawdowns in oil inventories (Dec... - 5 million?). It won't take long for inventories to fall with CAPEX of most oil companies dropping by 50% by 2017.