Iran's Oil Exports Will Not See Significant Increase in the Next Five Years

The executive director of the International Energy Agency states that even if a comprehensive nuclear agreement is reached by the end of July this year, Iran's oil exports will not see a significant increase in the next five years. According to Reuters, Fatih Birol, the chief economist of the International Energy Agency, which advises 29 industrialized countries on energy, stated on Sunday, April 12: 'While the chances of a sudden spike in Iran's oil exports are low, the likelihood of a gradual decline in global oil production has increased, as the International Energy Agency estimates that investments in oil exploration and production will decrease by $100 billion in 2015 due to falling prices.' Iran and six world powers recently reached a political agreement on nuclear issues, raising hopes for a comprehensive nuclear agreement by July 1 of this year. If a comprehensive agreement is reached, economic sanctions against Iran will be lifted. However, Mr. Birol had stated last autumn in an interview with Reuters that if a comprehensive agreement is achieved in the next three to five years, Iran's oil production is expected to grow significantly. Now, this senior economic expert from the agency says that due to the geological complexities of Iran's oil fields, which have not been optimally maintained due to sanctions in recent years, the possibility of a sudden increase in their oil production is unlikely. Western sanctions have not only caused Iran's oil exports to drop from 2.5 million barrels to 1.1 million barrels since 2012, but they have also hindered investment, services, and maintenance equipment for oil fields. Approximately 80% of Iran's oil fields are in the second half of their life cycle, and according to the U.S. Energy Information Administration, their production declines by 8 to 13 percent annually. Iran needs maintenance actions to slow down the decline in production from these fields. Mr. Birol also believes that lifting sanctions against Iran will not significantly impact global oil prices, which have halved since the first half of 2014. He stated that global economic growth, particularly in Asia and Europe, and investments to increase oil production are major factors influencing global oil prices. He noted that the outlook for economic growth in Europe, which plays a decisive role in increasing oil prices, is assessed as very slow. He also mentioned that tensions in the Middle East have raised questions about the security of investments in the region's oil fields. While investments in oil exploration and production are expected to decrease by about 20% this year compared to 2014, the agency's executive director stated that such a decline had not even occurred during the global economic crisis. He said that if we combine the decline in investments in production with the increase in global economic growth, a rise in global oil prices in the foreseeable future is conceivable. Reuters writes that the 29 industrialized oil-consuming countries that consult the International Energy Agency had a 70% share of global oil consumption 41 years ago when this international agency was established, but with the emergence of large economies like China and India, this share has now dropped to only 50%.