Iranian President Hassan Rouhani announced that his country has found a new oil field, which contains an estimated 53 billion barrels of crude oil, in the southwestern province of Khuzestan.
The discovery increases Iran’s proven reserves by a third.
Covering roughly an area of 2,400 sq km, it’ll be the country’s second largest oil field, trailing behind the one in Ahvaz with its 65 billion barrels capacity. Iran is currently ranked the fourth biggest holder of oil reserves by the U.S. Energy Information Administration, but the new discovery would move it up to third — just behind its regional rival Saudi Arabia.
This follows a discovery of a natural gas reserve last month, which the Iranian government estimates could produce $40 billion in revenue.
Despite these findings, Iran continues to struggle to export its oil due to U.S. sanctions. President Trump’s withdrawal from the Iran nuclear deal and the reimposition of sanctions have crippled the Middle Eastern state’s economy. This has resulted in the Iranian rial plummeting in value, while the country suffers from increasing levels of inflation. The International Monetary Fund predicts that the country’s economy will contract by almost 10% this year.
In the short term, it is highly unlikely that the new discovery will bring in any immediate benefits. While the other signatories to the Iran nuclear deal — France, Germany, China, Russia, and the United Kingdom — continue to seek alternative arrangements in order to enable Iran to trade and export its oil, they have yet to achieve any concrete solutions. Fears of losing out on American commerce remain the biggest stumbling block, especially for Western European countries.
Additionally, it will most likely take years for the necessary extraction infrastructure to be constructed. And Russian and Chinese firms may enter the scene, possibly as early as 2021 should Trump lose his reelection bid, in the hopes that the U.S. will lift its sanctions.
Iran’s discovery is sure to cause further anxieties in both Riyadh and DC policymaking circles. In the case of the former, the launching of Aramco’s IPO might be mildly affected by Iran’s discovery, but the greatest effect is likely to be seen in the years to come in that Saudi reserves may no longer be seen as central to the region. In Washington, on the other hand, the discovery will probably reinforce its anti-Tehran position, especially if it provokes renewed interest in Iran’s economy by foreign investors. Additionally, Trump’s fixation on capturing oil fields — such as in Iraq, Syria, and Venezuela — is likely to continue in light of the recent news in Iran.