Wait and see on Iran, oil voices say

WASHINGTON, July 15 (UPI) — A U.S. refinery group said it’s too soon to discuss doing business in the Iranian oil sector, though opposing voices said it was a threat to domestic producers.

A deal brokered in Vienna between Iran, the five permanent members of the U.N. Security Council, plus Germany, would ease sanctions pressure constricting the Iranian energy sector in exchange for sweeping restrictions on its controversial nuclear program, which Tehran said is for peaceful purposes.

Energy companies from Royal Dutch Shell to BP said after the deal was signed they were examining their options in a post-sanctions Iran, where production and export potential could expand with the appropriate investment strategies.

Jay Hauck, executive director of the Consumers and Refiners United for Domestic Energy, or CRUDE, coalition, said those companies and their industry backers were moving ahead of the debate by calling for more support for the domestic U.S. energy sector, where the shale boom has sparked calls for oil exports.

“Let the ink dry and the hearings take place, and let the ability to lock in a non-nuclear Iran be the focus of the debate,” he said in an emailed statement. “There is plenty of time later to discuss profiteering.”

Congress has 60 days to review the deal and, while many in the Republican Party have expressed reservations, President Barack Obama said he’d veto any effort to undermine what he described as a diplomatic victory.

Investment firm ING reported Iranian oil exports could spike “in theory,” though there are some technical and political obstacles. Iran’s crude oil production is down by about a quarter of its pre-sanctions level of 3.6 million barrels per day.

George Baker, director of the Producers for American Crude Oil Exports group, said the nuclear agreement would give Iran a better position in the global market than producers in the United States, where crude oil exports are banned by legislation enacted in the 1970s.

“Once these sanctions [on Iran] are removed, the United States will be the only major oil-producing country in the world that has restrictions on the export of domestically produced crude oil,” he said in a statement.

Total U.S. oil production is in excess of 9 million bpd. Crude oil exports are banned except under certain circumstances, through policies are more lax for certain petroleum products.

U.S. Sen. Lisa Murkowski, R-Alaska, chairwoman of the Senate Energy Committee, said crude oil prices would likely fall if more Iranian crude oil enters the market as a result of an easing of sanctions pressure. Lifting sanctions on Iran without lifting the ban on U.S. exports is lopsided policy, she argued in June.

With the deal in place, Murkwoski said she was “skeptical” of the measure, but made no mention of oil or exports policies in a statement expressing reservations.

Richard Nephew, program director for Economic Statecraft at Columbia University and former sanctions coordinator at the U.S. State Department, said in a research brief new oil will flow from Iran, but likely not at the levels that most optimists predict.

“Markets should be wary of overly optimistic estimates of Iranian oil production,” he wrote. “And international energy companies, eager to invest in Iran’s formidable reserves, should perhaps be the most cautious.”