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Any new sanctions a challenge to Irans energy sector

October 17, 2017/ 09:45

Following Trump’s speech where he announced his new Iran strategy, any new sanctions will very probably come as a challenge to Iran’s energy sector, Omid Shokri Kalehsar, an energy analyst based in Washington DC, has told Trend.

"Iran holds the world’s fourth-largest proven oil reserves and the world’s second-largest natural gas reserves. Lifting sanctions in the wake of implementation of the Iran nuclear deal in fact opened large opportunities for the resource-rich country to push forward its long-stagnated industry. Intensified visits by international companies to Tehran to find a deserved place in the perspective Iranian market have been a reality of the past few months. To improve conditions for its oil and gas sectors, Iran needs capital and technology that can be provided by international companies," Dr. Shokri said.

"According to Iranian officials, Iran needs about $100 billion foreign investment in the oil, gas and petrochemical sectors," he noted, adding in the oil sector, most of Iran's oil fields are in its second half of life, with 8 percent of oil production annually dropping automatically, and Iran needs technology and capital from foreign countries to increase its oil efficiency.

"The Joint Comprehensive Plan of Action (JCPOA) is not a bilateral accord signed between Iran and the United States, but closed among six countries. Foreign companies willing to invest in Iran may be subject to unilateral banking sanctions pushed by the US government. If new sanctions are imposed by the US government against countries which are interested in investing in Iran, especially in energy sector, it may exacerbate the uncertainty of investors, leading to Iran losing investment opportunities and hampering the country’s plans to achieve its goals of luring foreign investments," Shokri said.

"The ban on dollar deals with Iran, the concern of big banks to experience the heavy fines imposed on them by the Treasury Department, the obvious opposition of significant portions of the US Senate and Congress to the nuclear deal, all play into more and more restrictions on Iran."

Shokri stated that one should wait to see what kind of sanctions US Congress will pass after Donald Trump’s decertification of the JCPOA.

In his recent speech on Iran, the US president said, "The Iranian regime has committed multiple violations of the agreement."

"Trump’s recent remarks about JCPOA are expected to affect directly and indirectly foreign investment in Iran’s energy sector. If Congress imposes new sanctions on Iran’s energy sector, Iran may face problems in marketing of its oil and other energy products. In any case, regional markets such as Pakistan and Turkey will be the best option for Iran to export oil and gas. Turkey is already a customer of Iranian natural gas and needs more of it. Iran also has to sooner operationalize IP project with Pakistan," the energy analyst noted.

"Given the current situation and the level of domestic consumption as well as the high energy intensity, Iran needs foreign investment, and without foreign investment it is likely that Iran, as an OPEC member facing huge investment rivals such as Iraq and Saudi Arabia, will fall behind in oil production. In OPEC a country with a low oil output will lose influence. Therefore, to preserve its place in OPEC, Iran needs to increase its oil production. After sanctions were lifted, Total and NIOC signed a contract for the development of Phase 11 of the giant South Pars gas field. If the EU stays willing to invest in Iran’s energy sector, Iran can see brighter days."

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