Saudi Arabia has reportedly banned vessels transporting Iranian crude from entering its waters. Iran has also yet to regain access to the Sumed pipeline in Egypt, which transports crude from the Red Sea to the Mediterranean from tankers that are too large for the Suez Canal. A key to accessing European markets from the Persian Gulf, the pipeline is operated by the Arab Petroleum Pipeline Company owned by EGPC (Egypt), Saudi Aramco (Saudi Arabia), IPIC (United Arab Emirates), three Kuwaiti companies and QGPC (Qatar). All four of the GCC countries involved have severed diplomatic ties with Iran while Egypt has reaffirmed its support of Saudi Arabia.
Iran Constrained by Saturated Market
While non-dollar denominated sales and banking and shipping insurance difficulties have complicated sales, some of Iran’s issues in ramping production have been self-imposed. For example, most of its contracts have been tied to outdated destination clauses. Moreover, the Persian Gulf producer has been unwilling to discount its prices, at least thus far, to sell incremental volumes into an oversupplied market. While Iran’s reluctance to cut prices is positive and could prevent it from achieving its widely trumpeted ambition to restore output to its pre-sanction level of 4 MMBls/d, its supply should continue to grow as contracts are modified and the country attempts to reestablish its market share. Recent estimates peg Iran’s March output at 3.2 MMBls/d, up 100 MBls/d from February and 300 MBls/d from December 2015.
April 5, 2016
Energy & Power
Oil & Gas Exploration and Production
Stifel
Iran: Not so fast at ramping up production
Iran: Not so fast at ramping up production
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group