Boston, MA -- (SBWIRE) -- 05/05/2014 -- The November 2013 interim nuclear deal reached in Geneva has rightly been hailed as a significant development in the negotiations between Iran and the West, and marks a further improvement in the Islamic Republic's international position since the election of Iranian President Hassan Rouhani in June 2013. However, it is crucial to note that the agreement does not lift sanctions on Iran's oil exports and does not allow for additional Iranian oil sales. Any significant easing of the oil export ban would only come as part of a broader, final settlement, which would be at a minimum 6-12 months away. For the moment therefore, the Iranian hydrocarbons sector remains largely impaired due to the ongoing sanctions. In terms of gas, we believe that Iran will not be able to increase production sufficiently to satisfy mounting domestic gas demand. This will translate into increasing gas shortages. Meanwhile, Iran is claiming a succession of major oil and gas discoveries that, if proven, demonstrate considerable upside potential to its existing resource base. In a bid to secure much-needed investment, Iran is offering improved terms to contracts long seen as uncompetitive by operators, but few national oil companies are likely to bite as long as sanctions are upheld.

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We highlight the following trends and developments in Iran's oil and gas sector:

- The country's oil reserves have increased in the past two years. In 2013, Iran's oil reserves were estimated by the Energy Information Administration (EIA) at 155.5bn barrels (bbl), a 1.1% increase from the 2012 figure of 151.1bn bbl. Iranian oil production and exports have fallen substantially since 2011, on the back of ever-tightening sanctions against the current Iranian government. We estimate that crude (including lease condensates) production in 2013 fell by around 23% from 2011 levels, from 4.05mn barrels per day (b/d) in 2011, to 3.13mn b/d in 2013.
- The International Energy Agency estimates that crude oil exports averaged just 1.1mn b/d over the first nine months of 2013, down from 2.5mn b/d in 2011 and 1.7mn b/d in 2012. Based on crude production and consumption figures, we estimate that Iranian 2013 crude exports (including condensates and all other liquids) most likely hovered around 1.8mn b/d. It is important to remind that Iran is a significant producer of condensates, and that current international sanctions do not sanction condensates exports. We note, however, that there can be no certainty at this stage over the scale of Iran's production and overseas sales.

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