BMI View: The alleviation of sanctions has the potential to significantly turn around Iran's energy sector, given the size of undeveloped oil and gas reserves and opportunities in the downstream sector . Nevertheless, this will require time and significant amounts of capital. New contract negotiations and terms on offer will be a crucial determinant in gauging demand and participation by foreign oil companies.
|e/f = BMI estimate/forecast; Source: BMI, EIA, IEA, OPEC, Bloomberg.|
|Crude, NGPL & other liquids prod, 000b/d||3,197.4||3,385.0||3,423.6||3,786.5||4,007.5||4,029.9||4,048.6|
|Refined products production & ethanol, 000b/d||1,800.0||1,872.0||1,872.0||1,872.0||1,946.9||1,985.8||1,995.7|
|Refined products consumption & ethanol, 000b/d||1,810.0||1,820.0||1,816.4||1,843.6||1,880.5||1,908.7||1,937.3|
|Dry natural gas production, bcm||162.6||174.0||184.1||197.9||207.8||211.9||216.2|
|Dry natural gas consumption, bcm||158.9||171.0||180.9||190.3||196.0||200.0||204.0|
We highlight the following trends and developments in Iran's oil and gas sector:
We have adjusted upwards our Iran crude oil and condensates forecasts to take into account the stipulations of the Vienna Agreement. While we had tentatively forecast the relief in sanctions to amount to about 600,000 b/d of incremental production, the pace will be much quicker than we expected. This has prompted us to bring forward the scope of a ramp-up in production and exports to H1 2016. There is substantial upside risk to our forecasts past 2017, dependent on the attractiveness of new contracts and IOC interest.
First additional oil exports will begin in H116 and will ramp up quickly. All new oil production will be earmarked for exports. In addition to volumes released from storage, Iran will be able to increase crude oil and condensates exports by a maximum of 700,000b/d by end-2016.
We expect the lifting of sanctions reinforces the likelihood of completion of the first phase of the Persian Gulf Star refinery by 2017, further boosting Iran's gasoline production. We note upside risk to Iran's refining capacity in the second half of our forecast period should international sanctions be lifted in 2016.
We have slightly revised up our refined fuels consumption forecast past 2016 to account for the economic boost following sanctions alleviation. Nevertheless, we forecast oil consumption growth past 2016 to remain significantly lower than pre-sanctions growth. This is on the back of our expectation for further subsidy cuts as lower oil prices and highly subsidised energy prices are putting strong pressure on the government budget.
With refining capacity expansions and fuels subsidy cuts, Iran is close to self-sufficiency in refined fuels. Since 2011, Iran has notably reduced its net gasoline import needs by over 90%. Should the first phase of the Persian Gulf Star refinery come online by 2017, we believe Iran could remain close to fuel self-sufficiency throughout our forecast period, with notable upside risk should further capacity expansions materialise.
We have adjusted our Iranian gas production outlook to take into account our expectation of a lifting of sanctions on the country's energy sector in H215. Production will rise over the coming four years thanks to South Pars production ramp-up. We note very large upside risk past 2019 from other South Pars phase developments and new gas field developments.
Insufficient domestic production over the past few years has lead to large gas shortages, notably in winter. With domestic production to increase post-sanctions, consumption will see a similar increase in the next two years as pent-up demand is met.
Large-scale gas exports from Iran will take at least five years to materialise. Such an increase depends on a significant ramp-up in production and the build-up of the necessary export infrastructure. While Iran has the potential to become a large regional gas exporter over our forecast period, we do not expect either gas exports to Europe or LNG exports over our 10-year forecast period.