Friday, June 24, 2016
In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.
Let’s take a look.
1. Iran’s rapid progress
- Iran has made shocking progress in boosting oil production. Since January, when international sanctions were removed, Iran has managed to increase production by 730,000 barrels per day.
- Iranian oil production hit 3.64 million barrels per day (mb/d) in May, about 80,000 barrels per day higher than in the month of April.
- Much of Iran’s increased output has gone to Europe, where Iran is fighting to retake lost market share.
- The extra supplies have prevented a sharper rally in international oil prices. But Iran’s near-term progress could be reaching its limits. Without investment in new oil fields, production could stagnate.
- The IEA projects Iran will average 3.6 mb/d for 2016 – roughly where output currently stands – and only rise to 3.7 mb/d in 2017.
- Iran has a goal of attracting $100 billion in new investment, but uncertainty over oil contracts along with lingering sanctions from the U.S. government could scare away western oil companies, at least for a while. Iran may not be able to significantly boost production from today’s levels for a few more years.
2. Venezuela a downside risk
- Venezuela’s oil production has been in gradual decline for years, but the pace of losses is starting to increase.
- Venezuela’s conventional oil fields are depleting and its massive heavy oil reserves require large-scale investments. Because the government has syphoned off revenues from the state-owned PDVSA in order to meet social and political objectives, the oil company has failed to invest in its future.
- But the financial crisis hitting Venezuela today is leading to worse losses. Oilfield service companies are cutting back on operations because of lack of payment. Electricity blackouts are cutting into refining production. Shortages of light oil have hampered diluting heavy oil production.
- Venezuela’s output fell 20,000 barrels per day in May, dropping to 2.29 mb/d, the lowest monthly output in seven years. The IEA sees an annual decline of at least 100,000 barrels per day this year.