Iranian oil exports

An immediate impact on global liquid fuels supply is not anticipated by the EIA following the November 24^th agreement between Iran and the five permanent members of the United Nations Security Council plus Germany, in light of Iran’s nuclear program. The made agreement does not allow directly for additional Iranian oil sales, although it does suspend sanctions on associated insurance and transportation services to those countries already granter import waivers.

Sanctions implemented in July 2012 on associated insurance and transportation services by the EU had a significant effect on Iran’s exports. However, Iran has been allowed to create arrangements allowing for the limited export of oil to some countries. The EIA does not anticipate those countries that continued to import Iranian oil to increase import levels, so without an easing of sanctions covering Iran’s ability to sell more oil, the country is not likely to significantly increase its production or exports in the short term.

The figures

As a result of sanctions imposed on the nation’s energy sector, total liquids production and exports dropped significantly and the recent agreement is not expected to significantly impact the existing sanctions for at least six months. The EIA has estimated that Iranian crude oil production was 2.8 million bpd in November 2013, down from an annual average of 3.7 million bpd in 2011 and 3 million bpd in 2012. Crude exports averaged 1.1 million bpd only over the first nine months of this year, which was down from 2.5 million bpd in 2011 and 1.5 million bpd in 2012.

The sanctions

The existing US and EU sanctions target Iranian petroleum imports and exports, prohibit large scale investment in the country’s oil and gas sector and cuts off Iran’s access to European and US sources of finance. Additional sanctions specifically target the Central Bank of Iran, while the EU imposed an embargo on Iranian oil in July last year, banning European Protection and Indemnity (P&I) Clubs from providing Iranian oil carrier with insurance and reinsurance.

The insurance ban has had a large impact on the Iranian oil export levels as the majority of insurance policies for the global tanker fleet are underwritten in Europe. The inadequate insurance has impeded sales of Iranian crude to all customers. In July 2012, Iranian exports fell to under 1 million bpd as insurance alternatives could not be found by Japan, China, South Korea or India based buyers. The recent agreement has suspended the shipping insurance ban, but many of the countries importing Iranian crude had already found alternative insurers, so there will be a limit to the export increase.

Adapted from a press release by Claira Lloyd.

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