Iran Ramping Up Its Crude Oil Production
$OIL, $RDS-A, $TOT
With the Western sanctions expected to be lifted soon as part of the 14 July nuclear accord, Iran plans to increase Crude Oil production to about 4.2-M BPD by the end of Y 2016.
Iran owns the world’s’ 4th-largest Crude Oil reserves.
The nation is currently produces about 2.8-M BPD, and Iranian officials believe the country can increase production by up to 1-M BPD within 6 months of sanctions being lifted.
In preparation, Iran is set to approve a new model of Crude Oil contracts named Iran Petroleum Contracts (IPCs) in the next 2 weeks. IPC will be introduced to foreign investors in conferences in London and Tehran in December.
IPCs are a modification of traditional “buy-back” contracted and are aimed at increasing foreign investment in Iranian Oil projects. Under the IPC, Iran will grant control of exploration, development and production on specified Oil fields to foreign contractors.
Royal Dutch Shell (NYSE:RDS-A), Russia-based Lukoil and France-based Total (NYSE:TOT) are among the companies reportedly interested in Iranian investment. IPCs are expected to last about 30 years and offer investors higher rewards for increased risk.
Iran has reduced funding for several infrastructure projects and increased Crude Oil and food prices to cut into its deficit, and the country hopes that the direct foreign investment allowed by lifting the sanctions will revitalize its economy.
According to market estimates, Iran will require more than $100-B in foreign investment to achieve its goal of producing 4.2-M BPD of Crude Oil.
But, it does appear that Iran has already reaped some benefits from countries expecting sanctions to be lifted.
According to reports, China imported more than 2.1-M tons of Crude Oil in August, which about 61% more than the same frame in Y 2014. South Korea’s state-run Korea National Oil Corp (KNOC) reported that the nation imported nearly 89-M bbl of Crude in August, a 3.5% increase from last year.
| HeffX-LTN Analysis for OIL: | Overall | Short | Intermediate | Long |
| Neutral (-0.24) | Neutral (-0.01) | Bearish (-0.29) | Bearish (-0.42) |
Stay tuned…
HeffX-LTN
Paul Ebeling
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