By Raj Rajendran

Source:

October 5, 2010

Japanese sanctions against Iran, the second-largest oil producer in the Middle East after Saudi Arabia, may reduce crude exports from the Persian Gulf nation by 25 percent, according to Nomura International.

“Recent Japanese sanctions against Iran could force oil exports to below 1.5 million barrels a day in the near term from 2 million barrels a day currently, negatively affecting global supply while helping push oil prices higher,” the unit of Japan’s largest brokerage said in a note today.

Japan said Sept. 3 it is suspending new oil and gas investments in Iran and freezing the assets of 88 organizations and 24 individuals in its latest round of sanctions. Inpex Corp., Japan’s biggest energy explorer, said Oct. 1 that it is considering withdrawing from the Azadegan oil project in Iran.

Iran is under sanctions by the United Nations and the U.S. for its refusal to stop enriching uranium to possible weapons- grade capability. Expanded U.S. sanctions on Iran and businesses active there have prompted Royal Dutch Shell Plc, France’s Total SA, Italy’s Eni SpA and Norway’s Statoil ASA to stop investing in the country.

“We reckon oil production capacity will likely decline by 15% from 2010-15, compared with Iran’s pre-sanction target of 35% growth,” Nomura said in a Sept. 30 note, when it first wrote on the theme. “Also, gas production is unlikely to go as planned, forcing Iran to abandon all of its liquefied natural gas plans.”

Nomura estimates that Iranian crude production will decline from a pre-sanction target of 5.3 million barrels a day to 3.34 million barrels by 2015, below the current production capacity of 3.93 million.

Inpex, which won rights to the Iranian oil field in 2004, cut its stake to 10 percent from 75 percent in October 2006 partly because of Iran’s nuclear program. Japan’s trade ministry owns 18.9 percent of Inpex.

–Editors: Alex Devine, Stephen Cunningham.