$300 billion in capital, Iran’s oil industry needs to revive

According to an exclusive report by Energy Press, Iran’s average oil sales in 2024 will be about 1.5 million barrels per day, most of which will be exported to China. This number was about 6 million barrels per day five decades ago and has not exceeded 4 million barrels per day in all the years since the war and sanctions.

While the global oil industry is facing a natural annual production decline of about 5 to 10 percent, the lack of foreign investment, sanctions, and the lack of modern equipment are causing this production decline in Iran to be even more severe.
On the other hand, the inappropriate structure of energy supply and distribution and dependence on fossil fuels have caused a severe energy imbalance in the country. Also, the country’s oil and gas infrastructure, after enduring sanctions for several decades and earning more than $1.6 trillion in oil revenue, is no longer functioning as it used to.
Morteza Behrouzifar, a member of the academic staff of the Iranian Institute of International Energy Studies, says that the Iranian government cannot sustain this industry by selling oil to China: Until we enter into relations and trade with the world’s giants, we cannot change this situation. Right now, we need $300 billion in capital to sustain the country’s oil industry, and this is not a number that can be easily provided. Even if financing is provided, as long as the sanctions are in place and we do not update equipment, technical knowledge, and technology, we will still not make progress.
He continued: Iran must enter into dialogue with the world’s oil powers and advance exports in a different way and change past policies.
The issue of how Iran’s oil is sold under international sanctions has always been a topic of attention. This non-transparent process has so far caused many problems, and institutions such as the Court of Accounts have also objected to it. The importance of this issue is that due to the non-transparency of the process, many resources are not collected, and the Court of Accounts has also criticized why these revenues are not collected.
Bloomberg wrote in an investigative report that in the first 9 months of 2024, about 350 million barrels of oil worth more than $20 billion were shipped from ship to ship in the Malaysian peninsula. That is, the same region where more than 90 percent of Iranian oil, about one million barrels per day, enters China.
The Kepler Institute also announced in a note that Chinese refineries continue to supply oil from Iran despite the tightening of sanctions. The company’s data shows that Iran’s oil exports fell to 1.43 million barrels per day in November due to domestic demand for electricity generation and a severe shortage of natural gas.
According to Bloomberg, recent sanctions on Iranian-related tankers and problems with Iran’s power generation may be among the reasons for the supply shortage and delays in the arrival of shipments. While small Chinese refineries continue to supply oil from Iran, analysts have predicted that the process of continuing these imports will become more complicated with the increase in sanctions following Trump’s inauguration.
Iran’s oil industry needs $300 billion in capital to maintain its capacity, increase production and restore its imbalances and worn-out structure. And until sanctions are lifted and global markets are opened up to the industry, we cannot expect any opening in this area.
In fact, the new government’s Ministry of Oil and the country’s managers should know that China is no longer our gateway to global markets, and with this order, we should be prepared to reduce production and export more in the coming years.