Iran possesses the 4th largest oil reserves in the world and largest gas reserves which has potential to be a key driver of global supply growth, Goldman Sachs Group Inc (NYSE:GS) said on Monday.
Value Walk websiteIt quoted the Sachs Group Inc report as pointing to “The Awakening of Another Oil Giant” in Iran.
The firm asked the question, “Why focus on Iran,” then proceeded to answer: “Huge potential” .
'Iran possesses the 4th largest oil reserves in the world and largest gas reserves which has potential to be a key driver of global supply growth.'
Significant uncertainty remains, however, around the lifting of sanctions, the investment required in fields and infrastructure, and the framework to be put in place by the Iranian government for international investment, the report noted.
Value Walk said if sanctions are lifted, Iran could grow to fulfill nearly 25 percent of the expected global demand growth in 2016.
Currently Iran accounts for 4.1 percent of global oil production and 5 percent of global natural case production, according to the firm.
Don’t expect an investment in Iran to be an overnight success. “Growth may take time,” the report said, echoing a common investment pitch phrase that is most often followed by a call for cash. Such an investment is “requiring attractive contract terms and significant investment,” which Goldman estimates at $30 billion over 5 years.
“There is potential for production growth far in excess of our base case, with the limiting factors ultimately being above ground issues, primarily around the level of investment that is incentivized. This potential growth could maintain pressure on oil prices, and delay the re-balancing of oil markets,” they wrote.
The fall of oil price is a concern for US-based production, but those laws of gravity don’t necessarily apply to Iran, which has a much lower price of production. The report estimated that the average break even could be near $20 to $35 per barrel, said the website, adding with the price of oil hovering near $45, that appears as an attractive return on investment.