EU oil embargo on Iran poses difficulties to Europe

Reports show that, European countries still have difficulties finding better replacement for Iranian oil in terms of price and oil quality after their sanction on Iran oil.
Iran president, Mahmoud Ahmadinejad, ridiculed the EU sanctions against Iranian oil on Tuesday, saying that Iran did not need EU purchasing of Iranian oil, and said; “sanctions is to their own detriment”.

Closer look at the EU sanction on Iranian oil reveals that many EU countries have difficulties finding better quality oil with better prices since they have sanctioned Iran’s oil.

British Petroleum (BP) and Statoil Hydro of Norway have monopoly on oil fields of North Sea. British Petroleum operates on Valhall, Hod, Ula, and Tambar, and Statoil Hydro operates on Njord, Asgard, and Troll oil fields.

Jan Haugland, the Head of Norwegian Petrochemical Information Department says Norway has sovereign rights to 54 percent of oil and 45 percent of gas reserves in North Sea. Norway is one of the countries which can replace Iran. According to estimates, Norway’s oil wells are being dried out, and Norway may take strategic changes in its oil policy.

According to Norwegian government officials, more than half of North Sea oil reserves has been extracted , which has caused western countries to express their concerns over ever-decreasing oil resources. The Figure below shows predicted oil production trend from 2007 to 2016.

The RoyalNorwegian MinisterofPetroleumandEnergy says that oil production would reach its lowest level since 1988 due to drying of North Sea fields, and new measures may be needed. “Norway’s current 561m barrels of 2012 will be lowered to 538m barrels in 2013,” added the Minister.

UK Oil and Gas Industry Association reports that oil production in North Sea has decreased 18 percent in 2011, with average decline of 6 percent since past five years. At the same time, explorative excavations have been decreased 50 percent compared to that of 2010.

London-based Financial Times has a report on difficulties on oil extraction in Europe. “Iraq, Saudi Arabia, and Russia are countries the EU have replaced the Iranian oil with; but oil from these countries is different in terms of quality, posing problems to European countries oil industries,” FT. reported.

Russian Urals oil (a mountain range between Asia and Europe) is similar to Iran’s oil, making it good candidate for replacing Iranian oil for the green continent. However, its high sulphur content makes it unfit for refineries and poses problems to EU oil market since sanctions on Iranian oil by US and EU began.

EU oil companies such as Italy’s Eni and Turkey’s Tupras have welcomed Urals’ oil, but its high price and low quality still pose problems for these companies. As a result of sanctions on Iranian oil, oil prices have skyrocketed. It seems that western countries including Norway have launched attempts to revive their relations with Iran especially in energy sector.

Jens Petter Kjemprud, Norway’s ambassador to Iran met with Ishaq Royvar, the Director General of Ministry of Oil Public Relations Office, and expressed his countries’ pleasure to expand the relations with Islamic Republic of Iran on communications and information sector.

The ambassador stressed on the Iranian Energy industry self-sufficiency and production, and praised achievement of Islamic Republic of Iran’s petrochemical and gas industries.

Royvar further explained Iran’s capabilities on technology and human labor, and invited the ambassador to visit Iranian achievements in energy and oil sector in Assaluyeh.

Norway has tried to act as intermediary, and purchase Iranian oil indirectly, to save its position as EU’s main provider of oil.