Arthur D. LittleArthur D. Little

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A perspective on the Iranian upstream oil & gas industry

A perspective on the Iranian  upstream oil & gas industry

Can Iran achieve its full potential?

The global oil & gas market has begun to rebalance in the first half of 2017, following a period of suppressed prices that has stalled the US shale revolution and prompted OPEC intervention, with an agreement to take 1.2 mmbbl/d off the market. Despite this rebalancing, it is likely that the market will remain uncertain in the short to medium term.

In this context, and following two years of declining investment in exploration and production (E&P) with reserve replacement ratios falling dangerously low, many integrated energy companies and private investment funds are looking for the next big opportunity. The question is: could Iran be that compelling investment case? The size of the Iran's hydrocarbon reserves presents indisputable significant potential, boasting the world's largest proven gas deposits and fourth-largest proven oil reserves. What's more is that the current political leadership has displayed progressive reform and begun to rebuild relationships with the west, following decades of sanctions. A major milestone was reached in January 2016, when the Joint Comprehensive Plan of Action (JCPOA) was implemented, removing nuclear-related sanctions. Since then, a number of bold steps have already been made to swiftly rejuvenate the country's economy and draw much-needed investment back to its primary industry - oil and gas. Ambitious targets have been set across the upstream sector for the next four years, with plans to nearly double oil production volumes and increase those of gas by circa 50 percent. However, even to get close to these targets, companies must first find ways to address the financial, technical and capability gaps across the upstream industry. A possible roadmap has been constructed around five key pillars: urgently attracting foreign investment, optimizing existing resources, establishing a capability-building mechanism, prioritizing a fit-for-purpose gas-monetizing strategy, and improving global perception and access to new markets, including expanding the customer base in order to reach desired export targets. If Iran can agree on a strategic direction and deliver on its own targets, the only question that remains is how long it will be until Iran becomes the world's largest gas exporter.

Released: March 2017

Download File ADL_Iran_O_G_perspective-Global.pdf (.PDF, 1.1 MB)

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