Iranian Oil Will Not Be Stopped By Trump

Tyler Durden's picture

Submitted by Gregory Brew via OilPrice.com,

Despite new sanctions by the Trump Administration and an escalating war of words regarding its ballistic missile program, Iran is continuing to push ahead with plans to maintain oil production at around 3.8 million bpd, the level agreed upon at the November OPEC meeting last year. In order to do so, Iran will need to attract billions in new investment, as its current production is based on aging fields and crumbling infrastructure.

To maintain the current production level while continuing to export and meet domestic demand, Iran will need at least $100 billion in new investment. New U.S. sanctions, which target 25 Iranian individuals and entities said to be associated with the country’s missile program, is being touted as an “initial step” in the administration’s plan to push back hard on Iran’s regional ambitions, with National Security Advisor Michael Flynn announcing last week that the U.S. was “putting Iran on notice.” The Iranian response to the U.S. rhetoric has been mostly dismissive, with one Iranian official characterizing the Trump Administration as “inexperienced.”

The question is how these new sanctions or future U.S. actions against Iran may inhibit the country’s recovering oil and gas industry. The announcement of the new sanctions caused a slight tremor in prices, which was offset by inventory reports and reviving U.S. output. If tensions between the U.S. and Iran were to escalate, it would place upward pressure on prices.

Iran is set to announce a round of tenders in mid-February. Originally set for January, the tenders were delayed several weeks, in part due to disagreements within the Iranian government (which oversees the National Iranian Oil Company, or NIOC) over how best to attract foreign investment. Debates over new oil contracts raged all last summer, as the question of inviting more foreign companies into Iran is beset with political significance in a country still considerably isolated from international capital, as well as one that has a long history of distrusting foreign oil companies.

According to Reuters, the first round of tenders has been repeatedly delayed, while major companies have made only hesitant inroads into Iran. Shell signed a provisional deal in December to develop three large oil and gas fields, but has yet to act on it. French company Total agreed in principle to a $2 billion deal to develop the South Pars natural gas field, with a 50.1 percent stake in the project

The new round of U.S. sanctions, though they are limited in nature, are acting to deter U.S. companies from seeking new contracts. Deputy oil minister Amirhossein Zamaninia has welcomed interest from U.S. companies, but has warned that as long as the primary sanctions remain, “U.S. firms cannot play any role in Iran’s oil and gas industry.”

Zamainnia has expressed hope that President Trump, as a “non-conventional politician,” will seek to revise U.S.-Iranian relations and seek business deals, which could potentially serve the U.S. economy. Yet Trump’s hard stance on Iran thus far, and the imposition of new sanctions, would make that appear unlikely. The Iranian press claims the new sanctions are isolating the U.S., rather than Iran, which is still free to pursue deals with European companies. “Iran has placed no limitations on American companies, but based on their own laws they are not allowed to attend oil tenders in Iran," Zamaninia told the press.

Without U.S. companies participating, Iran could probably attract the investment it needs in the short-term. The tenders to be offered in February will include twenty-nine companies, most of them Chinese or East Asian, though Total and Shell have both been permitted to participate. BP was encouraged in January to bid once contracts became available, though the company has not said one way or the other whether it will participate.

Iran remains primarily interested in attracting European capital. This makes sense, both from an economic and political perspective (and with the U.S. sanctions and new administration, politics will matter just as much as economics). Iran wants to start exporting in large quantities to Europe again, and last month it dispatched the first major tanker shipments to a European port in five years. Should U.S. antagonism towards Iran increase, to the point that President Trump considers imposing new sanctions or even backing out of the July 2015 nuclear deal, it would place no restraint on European countries like Germany, Great Britain and France, who were all parties to the deal.

Germany company BASF, along with two other German petrochemical firms, has expressed an interest in investing as much as $12 billion in Iran, according to Iranian press sources. Total, for its part, has said that it is still ready to go through with its plan, now worth $4.8 billion, to develop South Pars.

It should be noted that a lot of the enthusiasm being generated about possible investments in Iran are coming from Iran-affiliated news sources. It may take some time to see if the confidence being projected around Iran’s ability to attract ample investment accurately reflects industry confidence in the country’s ability to work with foreign companies.

Nevertheless, should the February tenders be a success, and should Iran overcome its own political divisions regarding attracting foreign investment, there’s a strong chance the country will continue to develop its untapped oil and gas fields and continue the on-going recovery of its domestic energy industry, regardless of punitive actions taken by the United States.

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conspicio's picture

Sure, Iran moves ahead, which is why we should release 7M gallons of oil reserve after already sending the regime $1.5B? Something is fucky here.

Bob Beachcomber's picture

Trump should bring Assange here and pardon him.  He did nothing but help this go round and keep your friends close and enemies closer I say.

SoilMyselfRotten's picture

Some of the military people he has around him now think he should be shot so i wouldnt hold my breath on a pardon

Chris Dakota's picture

He should help him out of that embassy and to Russia with Snowden.

Say nothing just do it.

Im not sure Assange wants that though, he very well knew what he was doing when he started this.

He wanted to play the big boy game.

During the past year Assange was the most powerful man in the world.

ebworthen's picture

I say we withdraw from the Middle East completely, and let them kill each other.

What?  They aren't going to sell us oil at market prices?

Either conquer and take or leave them be completely.

Not rocket science.

Chris Dakota's picture

I am feeling very strongly that they want to wipe out the third world now.

World War is on deck for 2018-2020

I finally stopped caring this week.

We are all just passing through this long movie, none of this is real anyway.

dogismycopilot's picture

World is flush with cheap oil.

Russia has plenty of oil.

Leave the Middle East oil in the ground for now.

Luckhasit's picture

Stopped? No. But it can be heavily restricted and controlled.  The ISIS smuggling operation showed that if you have crude, you can sell it.

 

sinbad2's picture

Only if you have US approval, the US has no trouble stopping the legitimate Government of Libya selling oil, but can't stop al Qaeda in Libya selling oil.

The US also stopped the Syrian Government selling oil, but couldn't stop ISIS selling oil to Israel.

DivisionBell's picture

If we take Iran at its word, that it is not developing nuclear energy for military purposes, then why would they have such a large nuclear initiative?  How could they consume so much energy?  Sure, they can export it, as electrons, but they already have an energy storage medium that they are quite accustomed to and that is oil.

I suggest that Iran intends to make synthetic oil using their nuclear energy plants thereby eliminating any issues with their domestic wells underproducing, variability in crude quality, and the increasing costs of extraction over time.  With excess nuclear energy, thermal depolymerization or some carbide process and refining could work out nicely for them and provide an export product that can be sold in existing market channels.  So much for "Peak Oil", eh?

Of course, I'm sure they will make a whole lot of bombs too.  They can also use excess energy for directed energy weapons.

 

 

sinbad2's picture

The USA pushed Iran to produce its own enriched uranium, when the US seized their reactor fuel, whilst it was  overseas being reprocessed.

They didn't want the cost or hassle of producing their own fuel, the US made them do it.

They only ever wanted reactor fuel, for the reactors that the US had sold them. But as is quite common with US purchased equipment, the US uses spare parts and consumables as a weapon against the purchaser. That's one of the reasons countries now prefer to buy planes from Airbus instead of Boeing.

sinbad2's picture

A year ago Iran needed $200 billion to rebuild, now it's down to $100 billion, they must be getting money from somewhere.

I know South Korea invested $25 billion, but where did the other $75 billion come from?

sinbad2's picture

They won't take American money.

I don't know why you guys keep repeating this BS, but Iran will not touch US dollars.

When Barry returned the money the US stole from Iran, Iran demanded Euros and Swiss Francs, no dollars, not now, not ever.

dunce's picture

Let them flood the market with cheap oil. Some day they will run out of cheap oil and have a huge population to feed and employ. Bombs are hard to monetize. Exporting terror is not a viable business for the long term.

I Feel a little Qeasy's picture

You are of course talking about the US? Or are you a complete fuck-wit?

CosmicSauce's picture

A lot of sun in the Middle East. Solar farm makes more sense than nuclear power plant unless of course you wanna make some bombs...

Leave the Middle East entirely. Focus on positive trade deals. Let the MidEast countries destroy themselves. If corporations want to make trade deals, go ahead, just not on our dime anymore.

radbug's picture

There are 3 countries that can keep America out of a sub-5 EROI world, at least for a while, Venezuela, Iran & Libya. Keystone & DAPL ain't gonna do it. So, it's Donald Through the Looking Glass, aye?

onmail1's picture

U wanna destroy l$rael

Pick a fight with its enemy (say Iran)

Job done

Savyindallas's picture

US companies don't need to invest in these lucrative deals with Iran. Let Europe, Russia and China get all the deals and profits-let them do all the work and take all the risk. We don't need the money  - all we need to do is keep printing money  -forever--it's limitless. Our money doesn't grow on trees. That's too slow. We actually don't even have to print it. It's just a computer entry from the Fed. Our rich get much richer, the rest of us muddle along with the trickle down efects. Trillions in debt matters not -our kids won't have to pay it. We just print more. I used to think this was insane. Now I don't -it's like magic  -just print the goddamed money. If anyone complains -we just bomb the shit out of them. 

Yes there are some costs -our middle class is dwindling. White kids can't get jobs-even with MBAs- but who cares. White middle class folks had their day  -bunch of goddamed racists - we don't need them anymore- there are still plenty of rich white folks (mainly jews) who will live quite well being serviced by docile, ignorant, third world immigrants- and these folks don't complain. They are happy to be here. They respect authority-they know their place in society. They are the perfect citizens.

BigFatUglyBubble's picture

We can print ourselves right into WWIII.

dogismycopilot's picture

The extent to which Obama & Co fucked up the Middle East simply cannot be told. Americans are considered dogshit in the Middle East now adays. Sure the locals will be polite and proper, but they are going to do business with someone else...most likely someone else who is not bothered with the Foreign Corrupt Practices Act (FCPA).

  • The Iranians run Iraqi politics now.
  • The Russians and Chinese run the Iraqi oil fields.
  • The Russian and the Chinese will service the Iranian oil fields.
  • Syria will be rebuilt by Russian and Iranian construction companies.

The Americans are only good for free money and free Regional Oil Security Services. I am not sure how President Trump unfucks Obama's legacy here. It will be a difficult job. He is not off to a good start with the Yemen adventure and rattling Iran's cage. He needs to let Israel and the Saudis deal with Iran - it's their fucking neighborhood. 

 

dunce's picture

I have to wonder that many oil producers invest so little in oil shipping and refining or chemical plants.