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Iran Oil Revenue Grew in 2017

The most important outcome of Iran's nuclear agreement with six world powers, officially known as the Joint Comprehensive Plan of Action (JCPOA), in the petroleum industry was the recovery of Iran's share of oil market.

Iran Oil Revenue Grew in 2017
(Monday, January 22, 2018) 11:39

Oil analysts have described it as the "quickest return" to market. Iran's oil exports soared past 2 mb/d in June 2016; just months after the JCPOA took effect in January that year. Last June, Iran's total oil and gas condensate production reached 3.8 mb/d.

Thanks to Iran's oil diplomacy, the country's 2017 oil and condensate output surpassed 777 million barrels.

The return of Iran's crude oil cargoes to global markets and recovery of its share would have not been possible without the foresight of Iranian Petroleum Ministry officials.

Iranian oil officials knew quite well that oil production and export capacity has the final way in oil market. Relying on Iranian oil wells and companies, they tried their best in enhancing the country's production and exports rate in order to have a bargaining chip in their talks with rivals.

In their talks with delegates from Britain, France, China, South Korea, Japan and Italy, Iranian officials insisted on the return of Iran's oil barrels to world markets. One of the main points of negotiations between Iranian oil officials and dozens of foreign delegates in the wake of the signature of the landmark deal was the return of Iran's oil to Europe's market and increased purchase of crude oil by the pre-sanctions traditional buyers of Iran's oil.

More than two years have passed since the JCPOA was signed. Over these years, Iranian oil barrels have found their way into Asian and European markets. Furthermore, Iranian officials at the Petroleum Ministry plan to sign nearly $130 billion worth of new contracts in a bid to bring Iran's crude oil production capacity to more than 4.7 mb/d under the 6th Five-Year Economic Development Plan. To that effect, memorandums of understanding have so far been signed with leading international companies like Royal Dutch Shell, France's Total, Russia's Gazprom Neft, Lukoil, Tatneft, Zarubezhneft and Rosneft, Malaysia's Petronas, Indonesia's Pertamina, Thailand's national oil company, Germany's Wintershall, Austria's OMV, Japan's Inpex, Norway's DNV and several other Asian and European companies.

Alongside widespread plans formulated for enhancing crude oil and condensate production, Iran has turned out to be successful in raising its oil production and exports rate. Over the past two years, Iran's oil exports have increased more than 850,000 b/d, the highest export growth among fellow OPEC members.

Iran exported 2.13 mb/d of oil in 2017, 62% of which was destined to Asia and 38% to Europe.

China and India are top buyers of Iran's oil in Asia. South Korea and Japan are also among Asian buyers of Iran's oil, joined by European customers like Turkey, Italy, Britain, Hungary and the Netherlands.

Last year Iran also managed to export 180 mb/y of gas condensate, i.e. 490 tb/d.

Iran's gas condensate exports have declined in recent months due to feeding a major condensate refinery in Bandar Abbas, southern Iran.

Iran traded oil and condensate for around $52 a barrel in 2017.

The National Iranian Oil Company (NIOC) also exported 17 million tonnes of fuel oil and 2 million tonnes of gasoil to neighboring countries in the same year. Iran's 2016 oil and condensate revenue reached $41 billion.

Throughout 2016, Iran managed to raise its crude oil production by 726,000 b/d to 3.72 mb/d. Meanwhile, the price of Iran's crude oil for 2016 was set at $39.57 a barrel. Therefore, the increase in Iran's oil output in 2016 earned the country roughly $29 million a day. Iran's oil prices are growing thanks to a rally in global oil price. In 2016, Iran increased its oil production by 20% y-o- y.

In 2016, Iran increased its oil products exports (including gas condensate, LNG) by 74.6% to 897,900 b/d.

In total, Iran's oil exports reached 2.819 mb/d in 2017, up from 1.595 mb/d in 2015. The country's oil revenues also grew from $27.308 trillion in 2015 to $41.123 trillion in 2015.

40% of Iran Oil Sold to Europe

European companies resumed their oil purchase from Iran some two years ago. The Europeans, who had reduced to nil their crude oil purchase from Iran, are now receiving approximately 40% of Iran's oil cargoes.

Europeans consume 15 mb/d of oil, 11 mb/d of which is supplied through imports. Half the 11 mb/d Europe imports is delivered via pipeline and the rest is transported on oil tankers.

Iran is vying to win a share of more than 4 mb/d of Europe's oil imports via high seas.

Shell, Total, Italy's Eni and Saras, Greece's Hellenic Petroleum, Spain's Repsol and Hungary's MOL are among buyers of Iran's crude oil. These companies purchased on average 720,000 b/d of crude oil through January-August 2017.

Iran now needs investment in its ageing oil industry in order to stabilize its position in the world markets and within the Organization of the Petroleum Exporting Countries.

There is growing hope for foreign investment to flow into Iran's petroleum industry so that Iran would continue to remain instrumental in the global oil market.

Iran, which sits atop 10% of oil reserves in the world, is the fourth largest holder of crude oil in the world. However, due to a variety of reasons including lack of cutting edge technology, less than 20% of these resources have been tapped and the main part remains untapped underground. Furthermore, production from oil reservoirs in Iran has been done at their natural pressure over the past four decades, and today production depends on downhole pumps. Therefore, we need more than ever to negotiate and cooperate with knowledge-based companies.

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