Iran is still not a good oil investment

Fuel Fix:
Iran may have access to global oil markets, but the country’s oil and natural gas sector still faces serious political and economic challenges, a panel at the University of Houston said Monday.

The Middle Eastern country’s economy is ailing from years of international sanctions, the panel said. The country will also need to find buyers amid cutthroat competition that has driven the price of oil below $30 per barrel.

“Iran’s main challenge is finding customers and selling oil in the current market,” said Sara Vakhshouri, president of energy consulting group SVB Energy International.
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Iranian officials have said they plan to immediately boost production by 500,000 barrels per day and add another 500,000 barrels per day over the next six months. But those barrels will need to carve out space in a global market already flush with oil, Vakhshouri said.

Europe could be the prime target. “Iran lost about 600,000 barrels per day of market share in Europe when sanctions took effect,” she said, adding that they may be able to claw back as much as 250,000 barrels per day of crude.

International companies will be key to maintaining and growing production, said Cliff Kupchan, chairman and practice head at consulting firm Eurasia Group. But Iran’s political situation is hardly welcoming, he added.

“Some international oil companies will rush back in. . . but I think most will react quite cautiously,” he said. “Iran has a weak investment climate. Corruption is widespread.”

U.S. companies, in particular, continue to be locked out of the country under separate sanctions that severely restrict dealings with the Iran. Those restrictions give the U.S. some continuing
leverage over Iran, he added, but they mean almost no benefits of the country’s opening will flow directly to American businesses.
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It is also a political loser of an investment with some Presidential candidates saying they will tear up the current deal with Iran when they take office.  Congress is already considering additional sanctions because of Iran violation of UN restrictions on missile development.  The deal was very unpopular in the US so there is little upside to keeping it in place.

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