JCPOA Breathes New Life Into Oil Industry

International sanctions dealt a severe blow to Iran's oil industry from 2012 to 2015, but the landmark nuclear agreement and lifting of trade and financial restrictions gave a fresh lifeline to the key sector, former managing director of the Petroleum Engineering and Development Company said.

"One major aim of the international sanctions was to debilitate the country's economy by restricting its most important industry. Unfortunately, countries that had imposed the sanctions achieved their goals," Abdolreza Haji Hossein-Nejad was quoted as saying by ICANA on Monday.

Haji Hossein-Nejad pointed to the high expenses of oil production during the sanctions era.

"Prior to sanctions, the initial investment to produce crude oil from Iranian fields was roughly the equivalent to $7,000 per barrel. Nonetheless, after the  restrictions were further tightened, which forced us  to turn to Chinese contractors, investment costs soared to reach $35,000 per barrel."

According to the official, improvements after the implementation of the Joint Comprehensive Plan of Action [formal name of the nuclear deal with six world powers] a year ago resulted in reducing the investment to $15,000 to extract each barrel from West Karun oilfields in Khuzestan Province.

"JCPOA also cut drilling costs for each oil well from $20 million under the sanctions to $7.5 million in the post-sanctions period.

"Unencumbered by sanctions, Iran’s determination and ability to develop oil projects increased," he said, adding that as soon as sanctions became a thing of the past, development of mega ventures like the North Azadegan field gained momentum.

The field had experienced 40% progress between 2008 and 2013, but it registered a progress rate of 82% in just over a year.

Regarding other positive effects of the nuclear deal on the oil industry, Hossein-Nejad said it helped Iran regain the share it had lost in the global market for crude oil.

Oil exports shrank to around 1 million barrels per day soon after the restrictions,  as only a handful of countries were allowed to purchase Iranian crude. Once the second-biggest producer of the Organization of Petroleum Exporting Countries, Iran slipped to fifth place under the sanctions regime and Europe-bound shipments came to a standstill.

Energy experts believe that the easing of sanctions gave Iran's economy, and its associated energy sector, a vital impetus for growth.

According to Gholamhossein Gerami, deputy director of Iranian Oil Terminals Company, the lifting of restrictions allowed Tehran to augment the shipment of crude oil.

"Total outbound oil shipments reached 784 million barrels in the last fiscal, up from about 432 million barrels the year before. The rise stems from improvement in marketing and shipment conditions after the enforcement of the nuclear deal," the official said last week.

The government says it now exports 2.6 million barrels of crude oil daily, with some 700,000 barrels going to Europe.

International majors including France's Total, Italy's Eni, Royal Dutch Shell and Greek refiner Hellenic Petroleum are among customers for Iranian crude since the easing of sanctions in January of last year.