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Iran Oil and and the New Accord: Overview and Analysis


Despite last minute efforts to derail the agreement, the nuclear accord with Iran is a done deal. While generally agreeing that lifting Iranian sanctions will bring more Iran oil to market, analysts have delivered divided opinions on the timing and effect.

When will Iranian crude reach the world market?

Reuters writer John Kemp reports that it will take a number of years before Iran can export oil at pre-sanction levels. Currently, Iran does have the legal right to export to certain countries. The International Energy Agency stated in June 2014 that exports had increased by 28 percent that year.

How much crude does Iran have in storage?

Many observers believe that Iran currently stores a significant amount of crude at sea but disagree on the quantity and quality that could be immediately sold to consumers. Iranian stored crude oil estimates range from as much as 51 million barrels to as little as 7 million barrels. Because Iranian crude oil storage is not publicly and reliably reported, in the absence of objective human intelligence analysts estimate storage by counting crude oil tankers and measuring how low the ships float in the water. The lower the ship the more oil it contains. Iranian officials have stated that Iran will immediately ship hydrocarbon products as soon as the sanctions are lifted.

What is the quality of Iranian crude?

Some oil experts question whether refineries are capable of processing a significant percentage of stored Iranian oil. Iranian officials have stated that condensate represents the vast majority of hydrocarbon products in floating storage. Because the Iranian condensate contains high sulphur and toxic mercury content, it does not command the export market demand enjoyed by North American light, sweet condensate.

How will the Iran deal affect US crude oil exports?

The U.S. Congress is currently debating not only the Iran accord but also lifting the 1970’s era ban on U.S. crude oil exports to most parts of the world. Many political observers think that the Congress will come under greater pressure to lift the export ban due to the Iranian accord.

How quickly will foreign investment flow into Iran after sanctions lifted?

Decades of underinvestment in Iranian infrastructure, upstream exploration and production, midstream, and downstream maintenance and expansion mean that Iran needs to attract billions of dollars in foreign investment before hydrocarbon exports can return to pre-sanction levels. However, global investors are likely to exercise extreme due diligence before investing substantial concerns due to the legal and other issues such investments may face.

Your Turn

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Tom Morgan

Tom Morgan is an Analyst for Drillinginfo. He has 20 years of experience practicing law with a focus on advocating for public policy to advance energy security and private property rights. Tom received his law degrees from Georgetown University and American University law schools. He hosts the weekly Drillinginfo Energy Minute, and you can find and connect with him on LinkedIn as Tom Morgan.