Will China, Russia Defy U.S. Sanctions To Fund Iranian Oil Projects

Given the greater willingness of two of Iran’s long-time allies, China and Russia, to defy the U.S.’s re-imposed sanctions against the Islamic Republic – in China’s case because of the ongoing trade war and in Russia’s because of its own sanctions problems with Washington – Tehran is putting together development packages for three fields, involving one or both of these supporters. “Aside from having their own political agendas against the U.S., both China and Russia have two of the only five Permanent Member seats [the others being the U.S., the U.K., and France] on the United Nations Security Council, so the importance of their support is multi-layered,” Mehrdad Emadi, head of risk analysis and energy derivatives markets consultancy, Betamatrix, in London, told OilPrice.com.

At this early stage of exploration, the National Iranian Oil Company (NIOC) believes that there are at least 1 billion barrels of recoverable crude oil reserves on the site, and possibly substantially more. There is also a very significant amount of associated gas as well.

Crude oil production is due to hit the 50,000 barrels per day (bpd) level within the next 18 months, based on the standard recovery rate of Iranian oil wells in the West Karoun region of 5 percent. Serious enhanced oil recovery (EOR) techniques will not be used for the foreseeable future, as it would cause considerable disruption to the city of Abadan itself but, even without it, Iran’s Petroleum Ministry believes that production can be increased with relative ease to around 140,000 bpd within 24 months, with the right partners. From that point there is a lot of scope for further increases in output, based on higher reserves and/or an increase in the rate of recovery.