A comprehensive deal on Iran’s nuclear programme was reached on 14 July 2015 in Vienna. Among other things, the nuclear deal has paved the way for Iran to enter the oil market. Amit Bhandari, fellow for energy and environment studies at Gateway House, comments on what the lifting of sanctions could do for Iran’s oil exports, and it’s significance for India.
The complete analysis is available in Amit Bhandari’s feature article here.
Statement:
“The nuclear deal, and a subsequent lifting of sanctions, would allow Iran to return to the energy market. At its peak in the 1970s, Iran could produce over 6 million barrels of oil a day. But since the 1979 revolution and the imposition of sanctions, Iran’s oil production has fallen to less than half of that.
Iran can produce an extra 700,000 barrels of oil per day at short notice. This additional supply will extend the window of low oil prices globally. Iran also has the world’s second largest natural gas reserves, which will come into the market once investments in gas fields and infrastructure have been made. More gas in the international market will also keep prices low.
India imports close to 70% of its oil supply; it also has 23,000 megawatts of gas-fired power plants which are currently operating at very low capacity because of low fuel availability. Cheaper gas will enable these multi-billion dollar investments to become productive again.
Lastly, market values of many small and mid-size oil and gas firms abroad have fallen by 60-70% in the past 12 months. Indian companies should seize this opportunity to acquire oil and gas fields to sustain low prices for an even longer period. In the meantime, India can purchase oil in the futures market and guard itself against short term spikes.”