IAEA steps up pressure on Iran: Update 2
Updates with changes throughout
The UN's nuclear watchdog has stepped up pressure on Iran over inspection access, with its first formal call in nearly eight years for Tehran to co-operate.
The IAEA has adopted a resolution after months of more informal public requests by its director-general, Rafael Grossi, for inspectors to be permitted access to locations and for clarification on possible undeclared nuclear material and nuclear-related activities in Iran. This is the first such formal resolution on Iran that the IAEA has adopted since September 2012.
Unfettered IAEA access to Iran's nuclear facilities was a key part of the Joint Comprehensive Plan of Action (JCPOA) nuclear deal, under which Iran was freed of US and EU sanctions and allowed to export its crude unhindered. But this deal has been unravelling since the US pulled out of the deal and reimposed sanctions in 2018.
Tehran said in January that it would take a "fifth and final" step to reduce compliance with the deal by removing restrictions placed on the number of centrifuges installed at its two uranium enrichment sites in Natanz and Fordow. Shortly after that move the JCPOA's three European signatories — France, Germany and the UK — triggered the deal's dispute mechanism, although nothing tangible came from it.
Iran's "nuclear breakout" — the time required to enrich its existing uranium stockpile to weapons-grade material — has shrunk to three months from the JCPOA benchmark of one year, Institute for Science and International Security president David Albright projects. "Obviously, we do not fear they are going to do that right now — it is a benchmark."
Significantly, the resolution adopted by the IAEA today was put forward by the three European governments. Their foreign ministers met today in Berlin where they again affirmed their commitment to the JCPOA.
"We must address shared concerns about Iran's nuclear programme, its ballistic missile programme and its destabilising regional activities in the long term. To this end, we continue to believe that the strategy of maximum pressure will not effectively serve this goal," they said, referring to a phrase that the US government has used to describe its strategy on Iran.
The three said that they will seek a ministerial-level meeting with the Iranian government "to take stock", and said that any unilateral attempt to trigger fresh UN sanctions on Iran would be incompatible with their efforts to preserve the JCPOA.
The Europeans are pushing back against a US threat to invoke a UN Security Council "snapback" provision that would require the EU to impose economic sanctions if Tehran violates the terms of the nuclear deal.
US officials say they are considering the move as a way to force the UN Security Council to extend an embargo on arms sales to Iran that expires in October.
But the gambit — which involves making a legal claim that the US is still a JCPOA member for that particular purpose, despite the earlier withdrawal — may have more to do with ensuring that the nuclear deal cannot be restored regardless of the outcome of the US presidential election in November.
President Donald Trump has repeatedly called the deal the "worst ever". The presumptive Democratic nominee in the presidential race, former vice president Joe Biden, has said that if he wins the presidency, the US will resume its commitments under the JCPOA — including oil sanctions relief — so long as Iran resumes compliance with the deal. But that assumes a willing partner in Tehran, where enthusiasm for an agreement with the US has waned after Trump's unilateral moves.
"If it is President Trump winning re-election, he wants to increase his leverage and the maximum pressure campaign" by pushing for a UN-mandated snapback, says Rich Goldberg, who directed the Iran sanctions effort at the White House in 2018-19. "If Joe Biden wins the election, he too benefits from a snapback," Goldberg says. "Much better to have the benefit of the maximum pressure campaign sanctions and a reset of all the strategic restrictions on Iran."
US sanctions have cut Iran's crude exports by 2mn b/d but have fallen short of Washington's professed objective of bringing shipments to zero.
Related news posts
Mexico's long refining quest tilts in its favour
Mexico's long refining quest tilts in its favour
Mexico City, 6 May (Argus) — Mexico's six-year campaign to boost refinery output and cut its dependence on US oil imports is starting to pay off, but time will tell if it can sustain the effort. State-owned Pemex's six domestic refineries processed more than 1mn b/d of crude in March for the first time in almost eight years, boosting its gasoline and diesel output by 32pc and cutting its imports by 25pc from a year earlier. Combined with Pemex's still declining crude production, this has pulled approximately 500,000 b/d of Mexican crude exports — mostly medium and heavy sour grades — from the market compared with a 2023 peak of 1.2mn b/d in June — equivalent to the loss of about 175,000 b/d on average this year compared with 2023. The government said earlier this year that it was not planning "significant" export cuts after cancelling some term contracts. But the drop in shipments combined with the eventual start of its long-delayed 340,000 b/d Olmeca refinery, possibly in 2025, has the potential to shift global flows. At least two independent US Gulf coast refiners are sceptical of major shifts. Road fuel demand is expected to exceed capacity additions in the coming years, Marathon Petroleum chief executive Michael Hennigan said recently. Valero, which is opening a marine storage terminal in Mexico, where about 250 retail outlets carry its brand, expects demand from Mexico to remain strong and grow, chief operating officer Gary Simmons said in its latest earnings call. The impact of Mexico's shift to greater self-sufficiency will depend heavily on its ability to sustain its long-promised refinery renaissance. Mexico's crude exports have already picked up in April from March, to roughly 660,000 b/d based on ship tracking data, although still about 125,000 b/d lower than a year earlier. Energy independence Pemex's refining rates started to fall in 2014 after the previous administration chose to rely less on domestic production and focus more on opening the energy market to outside investment. President Andres Manuel Lopez Obrador vowed to make Pemex great again and build a big refinery to reach "energy independence" when he took office in late 2018. Lopez Obrador poured at least $3.7bn into maintenance alone at Pemex's ageing refineries in 2019-23, excluding major projects including uncompleted ones to add cokers at two refineries that will cost $6bn-8bn and a spiralling $16bn-20bn for the Olmeca plant. It bought out Shell's share in the Deer Park refinery in Texas , taking full control of the plant in 2022. With presidential elections set for June, it was time to show results. But Pemex has a long history of high accident rates , making refinery operations unreliable. The next administration may have to sustain some of this spending and tackle Pemex's $101.5bn debt at a time of calls for structural reform. In addition, the 330,000 b/d Salina Cruz and 315,000 b/d Tula refineries — Mexico's largest — have long struggled with elevated high-sulphur fuel oil (HSFO) production that takes up valuable storage space and makes it hard to run both plants at high rates simultaneously. Record-high exports of HSFO in March helped and Pemex is building coking units at both refineries to solve this, but they are unlikely to both start until early 2025. Attention is on whether and when the Olmeca refinery will affect Mexican demand and offer balance more permanently. Pemex said it will start producing diesel in late May, but also does not expect more than 9,000 b/d of output of all fuels this year . The refinery has missed multiple deadlines, the latest in April. Olmeca's crude unit — the first processing unit — faces "major issues", a source familiar with Pemex refinery operations says. But others say secondary processing units are ready. Pemex refinery operating rates % Domestic refineries Mar 24 Feb 24 Tula 78 80 Salina Cruz 72 40 Madero 69 60 Salamanca 62 60 Cadereyta 58 60 Minatitlan 53 50 Pemex Pemex exports, imports ’000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Chevron’s oily DJ basin buy boosts gas output
Chevron’s oily DJ basin buy boosts gas output
New York, 3 May (Argus) — Chevron's US natural gas production has surged in recent quarters due to its crude-focused acquisition of Denver-based PDC Energy last August, increasing the oil major's exposure to the US gas market months after that market entered an extended price slump. Chevron's US gas production in the first quarter was 2.7 Bcf/d (76mn m3/d), up by 53pc from the year-earlier quarter and the highest since at least 2021, according to company production data. Chevron's total US output rose by 35pc year-over-year to 1.57 b/d of oil equivalent (boe/d), while US crude output increased by 21pc to 779,000 b/d. The acreage Chevron picked up last year in the DJ basin of northeast Colorado and southeast Wyoming has higher gas-oil ratios than the rest of its US portfolio. Chevron mostly focuses US production in the crude-rich Permian basin of west Texas and southeast New Mexico. Since Chevron closed its acquisition of PDC on 7 August, US gas prices have mostly languished in loss-making territory. Prompt-month Nymex gas settlements at the US benchmark Henry Hub from 7 August 2023 to 2 May 2024 averaged $2.46/mmBtu, down from an average of $4.999/mmBtu in the year-earlier period. In a May 2023 conference call over Chevron's acquisition of PDC, chief executive Mike Wirth expressed optimism for the long-run outlook for natural gas, despite the more immediately dim outlook. "There's going to be stronger global demand for gas growth than there will be for oil over the next decade and beyond as the world looks to decarbonize," Wirth said. Despite lower US gas prices, Chevron has captured $600mn in cost savings from the PDC acquisition between capital and operational expenditures, the company told Argus . Crude prices have also been more resilient. Chevron's profit in the first quarter was $5.5bn, down from $6.6bn in the year-earlier quarter, partly due to lower gas prices. US gas prices have been lower this year as unseasonably warm winter weather and resilient production have created an oversupplied US gas market. A government report Thursday showed US gas inventories up by 35pc from the five-year average. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Kazakhstan outlines Opec+ compensation plan
Kazakhstan outlines Opec+ compensation plan
London, 3 May (Argus) — Opec+ member Kazakhstan has submitted a plan to Opec detailing how it intends to compensate for producing above its crude production target in the first four months of the year. Kazakhstan and Iraq — which has also submitted a compensation plan — are the Opec+ alliance's largest overproducers and a key reason why the group exceeded its overall production in the first three months of the year . Kazakhstan's energy ministry said it produced above its target by 129,000 b/d in January, 128,000 b/d in February, and 131,000 b/d in March, according to secondary source estimates. Opec secondary sources, of which Argus is one, have yet to formally submit their production estimates for April, but Kazakhstan said it is factoring preliminarily overproduction of 100,000 b/d for April. The ministry said it kept oil production high because of high winter demand for natural gas — much of its gas production is associated and is produced alongside its oil. Kazakhstan said it would start its compensation plan in May with an initial cut of 18,000 b/d below its official target of 1.468mn b/d. It would then stick to its target in June and July before implementing a cut of 131,000 b/d in August, none in September, 299,000 b/d in October, 40,000 b/d in November and zero in December. The cuts have been designed to coincide with scheduled maintenance at the country's key oil fields of Kashagan and Tengiz, the ministry said. Kazakhstan would have to reduce its output by 149,000 b/d in May compared with its March production of 1.599mn b/d to meet its pledge, according to Argus calculations. The compensation plan is set to be adjusted once a final figure for April is available. The plan would be further adjusted to accommodate any change in the Opec+ alliance's output policy — for which a meeting is scheduled to take place on 1 June in Vienna. Opec has been increasing pressure on members exceeding their targets. It called last month on countries that have overproduced to submit detailed compensation plans by the end of April. The Opec+ alliance has implemented a series of cuts — voluntary or collective — worth a combined 5.4mn b/d since October 2022 in a self-described bid to "support the stability and balance of the oil market". The latest round of "voluntary" output reductions by several members came into force in January and is due to run until the end of June. By Aydin Calik and Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Iraq sets plan to compensate for excess Opec oil output
Iraq sets plan to compensate for excess Opec oil output
Dubai, 3 May (Argus) — Iraq, Opec's second-largest oil producer, has submitted a plan to the Opec secretariat outlining how it will compensate for producing above quota in the first quarter of 2024. The plan indicates that Baghdad will make compensatory cuts from May through to the end of this year, although its breakdown could be tweaked if its April production is again above quota, based on average production estimates issued by the seven Opec secondary sources, including Argus . Opec+'s Joint Ministerial Monitoring Committee (JMMC) said in its 3 April meeting that members that have produced above their quotas so far this year would need to submit plans to compensate for the excess. Iraq and Kazakhstan, which Opec said has also submitted its own compensation plan, have produced the most excess excess volumes in the Opec+ group since the beginning of the year. The JMMC oversees compliance to the coalition's crude production cuts and studies market dynamics. Iraq produced 194,000 b/d above target in January, and overshot by 217,000 b/d and 193,000 b/d in February and March, respectively. To compensate for this, Baghdad plans to produce 50,000 b/d below its quota between May and September, 100,000 b/d below quota for October and November, and 152,000 b/d below its quota for December. Iraq has been working to a quota of 4mn b/d since the start of the year, including two rounds of voluntary cuts it made in April and November last year. Baghdad will submit its crude production figure for April later this week, it said. Any extra volumes produced will also be factored into the country's compensation plan. To meet obligations, Baghdad says it will cap its crude burn at 75,000 b/d and maintain refining intake to between 400,000 b/d and 500,000 b/d through to the end of this year, according to Iraq's Opec national representative Mohammed Adnan Ibrahim Al-Najjar. But Iraq has yet to decide whether it will extend a 3.3mn b/d cap on exports, in place since April , beyond the second half, as it will depend on "Opec+ agreements [in the June meeting] and [the needs of] Iraq's economy over the coming months," the oil ministry told Argus last week. When needs must With the summer season around the corner in the Mideast Gulf region, Iraq has pushed the majority of its compensation into the last three months of the year. Iraq in summer often experiences extreme heatwaves resulting in a major spike in electricity demand. Power shortages during the summer season have fuelled political unrest in Iraq in recent years. To strike a balance between its Opec+ commitments and avoid similar scenarios this year, Iraq says it will import higher levels of gas from neighbouring Iran, with Baghdad also beginning to benefit from electricity supply from Jordan through a newly-established power line which became operational at the beginning of April. Iran and Iraq finalised a five-year supply agreement at the end of March, which will see Tehran send "up to 50mn m³/d" of gas to Iraq, Iraq's electricity minister Ziad Ali Fadel said. But Iraq's persistent overproduction, which has drawn scrutiny within Opec+, might be difficult to address, especially as Iraq blames it on its inability to oversee production in the semi-autonomous Kurdistan region in the north of the country. Most Iraqi Kurdish crude output is directed to local refineries or sold on the black market following the closure of the export pipeline that links oil fields in northern Iraq to the Turkish port of Ceyhan just over a year ago. Iraq's federal oil ministry says its Kurdish counterpart has stopped providing production data, but on 3 May said it estimates Kurdistan Regional Government (KRG) crude production to be between 40,000 b/d and 50,000 b/d. Meanwhile, Iraq's oil minister Hayyan Abdulghani on 2 May announced that two joint Baghdad-Erbil committees have been formed to resolve the issue of contracts between Erbil and the international oil companies operating in the Kurdistan region. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more