Production Costs Remain the Main Challenge for Iran's Oil Output in the Post-War Era

An energy sector expert identified outdated technology and capital shortages as the Achilles' heel of Iran's oil industry development, saying that with existing aging technologies, Iran's oil production is not competitive in global markets in terms of production costs.

According to Ambassador Arjan's report, Mahmoud Khaqani, while analyzing the state of the energy market after the recent tensions in the Strait of Hormuz and the intensification of the maritime blockade, emphasized the need to review the calculations related to the country's foreign energy policy and stated: After the MoU on the cessation of hostilities between Iran and the United States was signed on June 28, 1405, and the prospect of opening up the export of oil and non-oil goods appeared, now the equations have changed. What could have been the golden era of Iran's return to world markets was stopped due to some military tensions.

He added: At one point, we were able to easily export oil and import equipment. But Donald Trump has canceled the memorandum and intensified the maritime blockade, and this issue has imposed costs on the national economy.

This energy expert said: Although the actions of the United States are against the principles of human rights and unwise and should be pursued in international courts, the way to deal with these pressures is to change the way of diplomatic interactions and prioritize national interests.

In response to some analyzes that see the closure of the Strait of Hormuz and the increase in oil prices as an opportunity for Iran, he stated: This is a big calculation error. The increase in oil prices in the current situation is not caused by a lack of supply, but is rooted in the destruction of the refining infrastructure. 3 million barrels of oil were processed and exported daily in the Persian Gulf region, which has been stopped or slowed down due to the damage to the refineries.

Khaqani said: The market is now facing an accumulated demand, and if the situation calms down and conditions return to normal, Iran will face new challenges for oil sales. Because oil competitors outside the Persian Gulf have greatly increased their production capacity and taken over Iran's market share.

Khaqani considered obsolete technology and lack of capital to be the Achilles heel of the development of Iran's oil industry and said: "With existing old technologies, Iran's oil production cannot be competitive in terms of the final price in the world markets."

He also mentioned the risk of investment and stated: In the current unstable situation, it is practically impossible to attract foreign capital in the short term.

This energy expert stated: While countries like Mexico and Venezuela need billions of dollars of investment to develop their infrastructure, Iran has to attract limited global investors, with fierce competitors like Iraq, all of which have the possibility of foreign resources; to compete

He also pointed to the approach of oil importing countries and said: Now the world trades based on national interests. For example, Venezuela is paying off its $100 billion debt to China with oil, and Chinese companies are running joint projects alongside American companies such as Chevron and ExxonMobil in Iraq and Latin America.

Khaqani pointed to the oil customers and noted: China has no problem to ensure its energy security and reaches an agreement with all parties. This is a great lesson for us; We should also prioritize national interests in regional policies and not allow the country's economy to become a victim of tensions that do not have a clear strategy at the end. Improving people's livelihood and economic situation should be at the top of priorities of energy diplomacy.