Since the easing of international sanctions in January 2016, Iran tried to make up for lost sales by releasing millions of barrels parked on tankers offshore.

Iran has sold all the oil it had stored for years at sea and Tehran is now struggling to keep exports growing as it grapples with production constraints, shipping and oil sources say.

Since the easing of international sanctions in January 2016, Iran tried to make up for lost sales by releasing millions of barrels parked on tankers offshore.

Tanker tracking and oil sources said Iran had sold its last stocks from the floating storage in the past two weeks. Much of the oil stored was condensate, a very light grade of crude.

With no more stocks at sea, Iran has lost a vital resource that had propped up exports.

Difficult path

“We do think that (floating storage) has been the primary cause of the boost in exports,” Energy Aspects analyst Richard Mallinson said, adding that now floating storage had ended total exports of crude and condensate were likely to slip.

“We see a very difficult path for Iran to raise crude output until it can get the Western expertise and investment back into the upstream, which has been notably slow to materialize,” he added.

After Western sanctions were eased, Iran’s output jumped from about 2.9 million barrels per day (bpd) to about 3.6 million bpd in June.

But it has barely risen since – fluctuating between 3.6 million and 3.7 million bpd – even though Iran fought hard with fellow OPEC members to be excluded from production cuts that came into effect on January 1 and will last till June.

The Organization of the Petroleum Exporting Countries pledged to reduce output by about 1.2 million bpd, but Iran was allowed a small increase to compensate for years of isolation. Yet it has produced less in the past three months than it was allowed.

Iranian Oil Minister Bijan Zanganeh said last month Tehran was prepared to produce 3.8 million bpd if OPEC agreed to extend cuts to the second half of 2016, effectively signaling there was little hope of a steep rise in Iranian output.

Need for investment

Prior to the lifting of sanctions, Iran stored unsold oil on ships, which peaked in 2015 at 40 million barrels on around 25 tankers. The country has up to 60 oil tankers in its fleet.

Iran’s drawdown of floating storage gathered pace in September. By the start of 2017, Iran still held an estimated 16 million barrels of oil on ships. Since then, they have emptied.

While the EU and United Nations lifted sanctions on Iran over its nuclear program more than a year ago, the United States has held separate measures in place and President Donald Trump’s administration has promised a tough line.

This has increased concerns among Western banks about offering finance to Iran, slowing energy investment decisions.

French oil company Total said in February it planned a final investment decision on a $2 billion gas project in Iran by the summer, but said this hinged on a renewal of US sanctions waivers.

“The uncertainty over the US position on further sanctions is casting a huge shadow on the oil trade with Iran,” said Paddy Rodgers, chief executive of tanker company Euronav.

In addition, the oil minister’s efforts to secure deals with Western firms has run into internal opposition in Iran, which holds the world’s fourth biggest oil reserves. The plans have now been postponed until after a May presidential election.

“Iran needs billions of dollars of investment to boost crude oil production and natural gas capacity,” said Mehdi Varzi, a former official at state-run National Iranian Oil Company and now an independent consultant.

“Most of the fields were discovered many decades ago and are way beyond their production capacity,” he said.