Iran's new oil discovery in the Khuzestan oil field will not make a significant difference in the short term without foreign investment, as Iran cannot currently capitalize on its new reserves, according to Mohsen Tavakol, a nonresident senior fellow at the Atlantic Council’s Middle East Program.
Along with sanctions on the country, Iran is facing a lack of the required technological infrastructure to be able to extract oil from the discovery in Khuzestan that has estimated crude oil reserves in the region of 53 billion barrels.
However, he argued that over the medium to long term, when the discovery is exploited, the financial impact would make Iran an even stronger competitor to Saudi Arabia and even a stronger player in the Middle East and worldwide.
Khuzestan holds 80% of Iran's onshore oil reserves and 57% of Iran's total oil reserves. The new field is the second largest in the country following the country's biggest super-giant field in Ahvaz in the same province, which has a capacity of 65 billion barrels.
“As long as there is a need for fossil fuel, there will be buyers for the Iranian oil," he said.
The development of the new oil field can be helped through foreign investment, which Iran intends to proceed with through opening an international auction for the management of the field, similar to the process for the Chabahar port.
"There are definitely European and Asian investors interested in investing in the new oil field but the biggest obstacle for them is the compliance to the current and future sanctions, like in the case of French TOTAL who was forced to pull out of Iran after the U.S. threatened to impose penalties on any business found still trading with Iran," he said.
Iran, with its 80% oil-dependent economy, is trying to establish both land and subsea oil and gas pipelines through Pakistan, Turkey, Iraq and India to expand its export infrastructure as an alternative to shipping from the Persian Gulf, Tavakol said.
To this end, he suggested that cooperation could be boosted for cross-border energy trade between Turkey and Iran.
"Turkey is an important geopolitical and economic partner of Iran. There is already a gas pipeline between Iran and Turkey and a second one has been proposed to enable the export of natural gas from Iran to Europe," he said.
He added that a sophisticated network consisting of both Iranian and non-Iranian companies would assist Iran in selling its oil at discounted prices on the international market, as it has done in the past while overcoming the obstacles of selling its oil with U.S. sanctions applied.
- Khuzestan as a hub of exporting oil
Tavakol emphasized that Khuzestan and its neighboring Iraqi city of Basra are very important oil export hubs for both countries.
"This can easily be observed by the huge security efforts that were put in place by both countries during the unfortunate Iraq-Iran war to ensure continued oil exports," he said.
According to data from the International Energy Agency, Iran's proven oil reserves are around 157 billion barrels in 2018, ranking fourth in the world and second globally for natural gas.
Iran, which exported 2.8 million barrels of crude oil and condensate daily in 2018, was able to export only 300 thousand barrels in October this year due to the U.S.' withdrawal from the Joint Comprehensive Plan of Action, also known as Iran Nuclear Agreement.
By Busranur Begcecanli