Boston, MA -- (ReleaseWire) -- 01/31/2014 -- BMI View: 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. Therefore, for the moment, the Iranian hydrocarbon sector remains largely impaired due to the ongoing sanctions. We do not expect a large increase in oil production and exports for the moment. 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 in view of sanctions and a backlash from the US/UN.
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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 2012, Iran's oil reserves were estimated by the Energy Information Administration (EIA) at 151bn barrels (bbl), a 1.8% increase from the 2011 figure of 137bn bbl. This figure is slightly below that provided by OPEC, which estimated Iranian oil reserves at 154bn bbl for 2012. At the time of writing, Iran's oil reserves are estimated by the EIA at 155bn 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 production in 2012 fell by around 16% from 2011 levels. According to the country's former oil minister, Rostam Qasemi, Iran's crude exports have declined by 20% amid international sanctions between 2011 and 2012. However, we estimate that the decline is much more pronounced. 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. Iran's current crude exports most likely hover between 1.2-1.3mn b/d. 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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